@libreleah they wrote a whole article about it: https://newpipe.net/blog/pinned/newpipe-and-online-advertising/
tldr: their main concern is privacy and they consider embedded sponsor segments ethical.
maybe they also don't want to anger video creators as much. personally i agree more with louis rossmann. i'm sick of useless or actually scammy ads with no accountability taken by the creators. https://www.youtube.com/watch?v=0Udn7WNOrvQ