Are people exiting PC gaming or do they already have gaming PCs with competent hardware?

I suspect the market is saturated.

I believe it's even more bleak than that. My theory/prediction:

Once these companies manage to make game streaming a reality, my guess is that they will scale back their consumer GPU divisions without hesitation. The goal is for us to ultimately own nothing. Software is already leased to us (you don't technically own the games in your steam or epic library). The end game is for hardware to be that way as well.Until then, we're going to see most people priced out of consumer hardware.

If game streaming services become a reality (I'm talking about a situation where latency and data transfer are less of an issue), they will be positioned as a revolution in entertainment that deliver high-end gaming performance to the masses. As the technology matures, we will see multiple services take hold. It will be like Netflix/Hulu/prime/peacock/etc. but Blizzard/Steam/Epic/Ubisoft/etc. Essentially we will have to pay the equivalent of a new PC/Console price tag every year to rent hardware.

Ironically, what holds this back in today's world is the greed and shitty infrastructure that's offered by US ISPs.

Dumping an inane amount of R&D into a 4090 competitor that nobody asked for would have improved their bottom line how exactly?

And not just AMD makes most of their revenue outside the gaming space nowadays. This is even more true for Nvidia thanks to the AI craze. I'm sorry but your first paragraph is completely self-centered and the economic conclusions just don't check out.

This is some real doom and gloom shit right here. You really think it's a single-vendor market? I guess if you want to buy a 4090 then yes it is, but everything else is a three horse race. This doesn't mean AMD is saying buy consoles, all this means is they're focusing on the midrange market that I'm 100% confident Nvidia will completely ditch sometime in the future and tell most customers to use Geforce Now if they want midrange prices. To be completely real here, Nvidia only has ray tracing holding them up right now, as soon as the competition catches up they won't have anything to gouge and will be kicking themselves for not really innovating any further.

This is how it's always been for the past 30 years, Nvidia makes a good card and prices it high with 4 or 5 generational updates, Radeon makes a good price/performance midrange card that undercuts Nvidia, everyone wins. The only difference now is Intel has created a very compelling product with their GPUs and I'm pretty confident battle mage will be a big improvement over the current Arc cards and give AMD a run for their money.

Intel is learning from AMD and playing the long game with their hardware, the latest core ultra CPUs are great in Linux vs Windows and will hopefully get better over time, and the battle mage cards will hopefully have day 1 support for Linux and good support for Windows. You simply have to change your expectations here, the market is shifting, Nvidia makes more money hand over fist with AI/ML chips and GFN than they do their consumer graphics cards, they don't have to make their cards cheap anymore to compete, they can price them however they want due to the cost offset of their server market. I personally find the midrange market to be way more compelling these days than overpriced high end Nvidia chips, maybe you should rethink your position as well.