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Most people don't even have all their games downloaded nowadays, it will fill up all the storage on a PS5/XB quickly too, I just delete games I haven't played in a while.

That said, using a 1TB SD Card for "cold storage" and even backing up other games you've downloaded onto a PC (so if you do get the urge to play them again you can just transfer to the SD Card rather than spending an hour+ downloading) works fine too.

You want main storage that is fast and large enough to hold any single game plus a little overhead at minimum, Switch 2 will have that.