XBox I don't even think has much of a future in the hardware business. With no serious competitor in the stationary business I don't think there's much pressure on Sony to have to take hardware losses any more so they will probably go with something of a more modest upgrade for PS6 which has a fatter profit margin for them day 1. Honestly though even PS5 wasn't that great of an upgrade over PS4 to begin with. Why even bother taking a hardware loss to begin with when you have no direct competitor.

The bottom line is it's all well and good to have hardware that requires $300-$500+ million to be spent and 7-9 years per game in development time to push performance and have the kind of scale traditional big budget games have, but how many studios can even afford to make those games.

GTAVI started development in 2014, it's not even ready to release 10 years later. Now ask yourself about games that are going to aim to have 2-3x greater visual complexity and some decent level of scale to top GTA VI ($500 million budget for the game itself too) ... like it becomes almost silly to think what that game would have to be to dramatically outpace GTA VI. $1 billion budget just for the game itself? Another 10+ year dev cycle? Who wants to finance that? 

You're not even going to see traditional console transitions anymore the way it used to be, cross-gen period is already 3-4 years now, that will become even longer to the point where generations don't even feel distinct at all because developers are already drowning trying to make games for existing hardware. 

And what is Nintendo gonna do after switch 2? Well there even be a need for switch 3 since they are not gonna be pushing graphics?

Who knows, but I think we are reaching the point where budgets and dev times supercede the hardware. 

Not even developers like Capcom can afford to make $300+ million the norm for every new game, so how are they eventually even supposed to top like GTAVI even 7-8 years down the line. It doesn't work. 

Nintendo I think is going to have an interesting future because I think the movie business is going to go extremely well for them and things like Mario CG movie sequels and the Zelda movie and probably eventually a Smash Bros. CG movie will put some pressure on them to keep having better graphics that more stay in line with the movie versions of their characters. 

Other regular 3rd parties though ... I think many of them (you can put Square-Enix in this category) are fucked. They can't afford those kinds of budgets with the limited audiences they have. 

AI will reduce development costs. NPC generators are already being explored. DLSS and frame gen are AI programs. The fact that people can't see AI as the future in gaming is astounding to me.

Don't believe me? Check out nvidia stock over the last 5 years.

That future sounds like a disaster because if Nintendo has to push those kind graphics that Means way more time for games to come out with a much bigger budget and ninetndo relies mainly in its first party.  They are just falling into the problem everyone else is dealing with .

Nintendo has a bigger future ahead of it than just games. Like Marvel, they are going to become a monster movie/media brand in the coming years I would predict, bigger than just gaming. More international theme park attractions, more hit movies, and then games also. They're going to become a company unlike the others in the game business. 

The Super Mario Bros. movie was the 2nd biggest movie of last year after Barbie, they are going to make a fortune with future films but more than that it's going to expand the reach of their IP dramatically in a similar way Marvel movies took characters that were mildly popular like Captain American and Iron Man and turned them into super well known iconic characters that everyone knows, I think you will see even B-tier Nintendo characters become very popular. 

I do see graphical jumps slowing down a lot after the 2030's since 10-15 years from now the peak of realism with real time graphics will probably be close enough to real life that there won't be that much left to go in terms of noticeable improvement. After that decade it'll be more about raising the floor and making those super realistic visuals increasingly easy and cheap to produce so that eventually even indie games produced by small teams can look that good and run on handheld devices.

The other problem is I think this generation of kids doesn't give a shit about graphics, lol. Not to the extent of people raised in the 80s/90s/early 2000s. Those people are old now and no long control what's trendy any more.  

You can show them the best looking game ever and they just go "eh whatever". It's the same thing with movies, once upon a time, "this movie has amazing special effects!" used to be a fairly reliable way to sell some movie tickets, nowadays you have kids who'd rather watch "content creators" with $0 budget on Tiktok or Instagram than a 2 hour $300 million dollar event movie. 

The future of popular media consumption I think is going to be shockingly different and more driven by home made content than popular corporate media. 

I'm not that optimistic about the future of the business, for the short term (next 10 years) I think you're going to see developers killed by rising budgets, then they will try to tell you AI is the savior, but what that's actually going to do is kill the industry entirely as we know it because those tools will be given the the mass public too in order to gain subscription money/revenue. Then the market is going to be flooded with games made by people sitting at home and probably illegally modded versions every popular existing game (ie: hey put Luigi into Mario 64 or Odyssey like you always wanted). When any 10 year old can make their own game with photorealistic graphics in their bedroom just by using text or speech prompts, what value do graphics even have at that point. 

They definitely don't care as much since massive leaps in just a few years or so like with Half-Life to Half-Life 2 don't happen any more and special effects in films have been good enough for quite a while at this point.

I wouldn't mind the market shifting away from big companies like Ubisoft and towards small teams and individuals though AI is gonna make it a lot harder for people in creative fields and loads of other fields for that matter to make money so governments are gonna need to do something soon cause a big societal shift due to AI is just around the corner.

Well for Square-Enix's case (getting back to the OP) for now and the forseeable future their goose is cooked. They're not going to be leading the industry in graphics or anywhere close given the sales (or lack thereof) they have. FF13 was on par with like GTAIV back in the day, but GTAVI is going to have several times the budget that future Final Fantasy games will get.

They probably realistically can't even afford to go much past FF7 Rebirth just based on sales reality, forget hardware this and that altogether.

A shrinking franchise that has a fanbase of old farts mostly in their late 30s/40s and is declining to maybe 4-5 million sales per installment is going to be hard pressed to even maintain $150 million budget range, let alone grow into $200 mill, $250 million, $300 million levels.

Graphics as a driving factor of sales in general I think is over for pretty much all Japanese developers. Nintendo is the only that can afford it and they don't care about photorealism, Capcom won't even spend to give Monster Hunter a proper generational leap, Square-Enix has this mess they're in, Sega is not gonna spend big money, Sony while technically a "Japanese company" they are cutting funding to their Japan studios so only a few of their Western teams get big money. Basically just leaves the Elden Ring guys. 

Japanese games will still look fine because art style really is more important than technical features once you get past PS3-fidelity anyway but if you're looking to Japanese studios to push the performance envelope ... good freaking luck with that.