Hi,
Are we allowed to use AI generated assets for the Jam?
Yes, if you aren't buying them. If you were to pay for the use of an asset generating program then you can use the assets that it generates for you. If you were to pay a vendor who has generated assets themselves to sell to others then that would be against the rules. As long as the asset itself can be distributed free of charge there should be no problem how it was made.
To use a comparison, if you make pixel art for your game it doesn't matter if that was created in LibreSprite (which is a free program) or Aseprite (which is the paid version) as long as the actual art itself isn't for sale.