There are lots of ways of generating random strings in SQL Server. But instead of spending much time on finding solution to random password generation, here is an easy way to do that.
SELECT SUBSTRING(convert(varchar(50),NEWID()),0,8) as password
This generates 8 charcters long password which is a random string.
Some results:-
673CB61
6BD26C7
7F5F1EB
SELECT LEFT(NEWID(), 8)
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