In theory those characters are under copyright, yes. But it's similar to posting memes or lets plays; they don't lawyer against it unless they're assholes. So, avoid Mario, I guess.
However, the training data used by many of these huge models of full of copyrighted material from smaller, poorer creators, which is a serious problem IMO. But they can't afford to lawyer up against the big megacorps so nobody in the US listens to them.
GenAI is really the rich get richer.
I believe there is still a major court case underway to decide if AI trained on copyrighted data makes it's derivative works copyrighted too.
It's an important court battle because it will set a precedent for every other AI related case for all the other AI companies
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