It's not an absence of first-party choices, but it is the case that the first-party choices they have are not nearly as prominent generally / important within their series as the headliners of past games.
I know people are going to disagree and potentially frame it by looking at the most niche of past inclusions or conflate what I've said with "scraping the bottom of the barrel" (which is not what I've said), but take any amount of the top Nintendo candidates and compare it to the most impactful characters from a past Smash game. Because those are the ones that are going to immediately resonate to the most consumers. Especially when you consider that characters like Toad and Tom Nook... probably aren't going to happen.
Now you have, like, the ninth or tenth most prominent Mario character, the fourth main character of a high b-tier Nintendo series, the third or fourth most prevalent Kong, a potentially recurring but maybe one-off Zelda character, a character a lot of people will probably think is Inkling, whichever current Pokemon they're promoting who is a complete crapshoot in lasting appeal, the lead of a dead RPG that was decently successful over twenty years ago, and the main character from Nintendo's very successful recent supercasual game.
I would say the closest you'd get to that would be 4's first-party lineup, which imo is currently the lowest in terms of average scale. But even then, when you have Villager, the Miis, Rosalina, Bowser Jr and Greninja, I think that trumps whichever five of what remains you would nominate as the "biggest".
I mean, it's the faces of Nintendo and the big third-parties which resonate the widest anyway, and on that basis (and its own reputation) the game will obviously still have the masses flock towards it. But yeah - what we have now in terms of first-parties on average isn't nearly as pedigreed as what they've added the previous times. That's part of why the third-party selection will continue to grow, compensating for it.