Yes, and it partly explains why the games of the 80's and 90's were creatively superior. 

There is a bell curve when it comes to graphical fidelity. We saw it in 2D, where the jump in the last 25 years for 2D gaming hasn't been that much greater than the jump from 1987 to 1997. And I'm talking about actual 2D games, rather than fixed-angle 3D games (including certain HD2D, like DQ3 HD2D) that are just marketed as 2D. 3D was destined to begin hitting the same barrier. Graphics are becoming a significantly less important marker for how important a game is. Right now, there are only a few development studios that are even attempting it anymore, and only those who know they'll sell 10 million+ at full price.

In other words, at the bottom of the bell curve, we can hypothetically say that doubling the power of the hardware might give devs the capabilities of making games that are multiple times better looking. However, at the end of the bell curve, software on hardware that's hundreds of times more powerful might only look about 40-50% better.

19887 and 88:

1994:

Up to 1997 (2D games were exceedingly rare on N64, but the few that existed were of a higher fidelity than most 2D games today:

Just to give an idea of what was possible with pre-rendering in 1997, although, the center tower element is 3D - but it's easily the least good looking thing here:

This generation:

But most 2D games these days look like this, because graphical fidelity stopped being as important of a marker for what makes a game great:

PS5 and Xbox Series is main improvement is 60 fps instead of 30 fps. A lot of the added specs went to that.

Although there are some odd ones like Ratchet and Clank Rift Apart looks stupidly good and way better than the remake. I would also invite a lot of people to compare Bloodborne to Demon Souls. That is a pretty darm huge jump. The improvements in 9th gen are definitely there if you know where to look.

Take things like lightning, hair, draw distance and they quite obviously improved along with the framerate. But it is not the same as PS3 to PS4, but that's partly because PS4 was basically a locked 30fps experience. All the crossgen titles didn't help either.

I expect things to get worse though. Insomniac games is good at taking advantage of PS5, because their engine is designed around it's strength and weaknesses. This is not good for pc porting though. And considering Playstation is going to put every single PS6 title on pc, they probably will make their engines less optimised for Playstation hardware and more flexible for easier and smoother pc ports.

Stellar Blade looks great in some areas, I particularly like what they done with the Great desert, Idk they made barrem environments like that look good but it's not a generational leap and there still is, not as much as UE5 or games using FSR, image quality issues. I particularly like the balanced mode in SB and wish all games with quality and performance modes that can't hold their shit together on either end and you have to choose between a choppy 30fps or pop in and fuzziness/artifacting. Many games have proven a smooth 30fps is possible, like Alan Wake 2 or Bloodborne which feel like the balanced mode in Stellar Blade. 

I dunno I was pretty impressed with Rift Apart and Space Marine II, some of those environments have so much going on, modern consoles struggle with it. It looks great as is. As did Ascent with the detail of that world and how far it goes. FFVII Rebirth is a nice-looking game with massive areas.. Cyberpunk 2077 runs well on modern consoles. Not possible on PS4 and XBO as we saw before.

There is eventually a law of diminishing returns, especially when having to balance frame rate, resolution, textures, lighting, etc.
NES and SNES had tons of 60FPS games. N64 had very few 60FPS games, and some games ran below 30FPS. Ocarina of Time was more or less 20 FPS during most normal gameplay.
PS1/N64 until PS5/Xbox Series largely prioritized 30 FPS so the graphics could be nice at the time. PS5/Xbox Series has tons of 60 FPS games.
Early PS6 games probably won't look much better than PS5 and PS5 Pro visuals.

The core idea of this post is wrong lol. Graphics aren't getting "worse", games need more time because they are bigger but companies aren't giving enough time for projects to complete because companies need to make the money back and that applies to every fan fav company like Larian, CDPR, FS. Consoles aren't magic boxes, they need time and work so games look like they are supposed to work. Video games aren't the kind of software that you can just segment in small parts that work perfectly once you put them together, there's always going to be problems. The bigger the number of pieces the bigger the chances for something to don't work as intended.

Now, if this post was made looking for examples well Demon's Souls is a 2020 game and still is one if not the most beautiful console game ever made.

Partly just diminishing returns, partly this gen's insistence on pushing for 60fps in almost every game while also trying to push high end features like nanite and lumen which the hardware can't comfortably handle at such framerates.

As mentioned, a lot of companies are also leaning too hard on image reconstruction like FSR to cut corners rather than optimizing their games to run at a decent resolution, which results in poor image quality.

For my money the best looking games on current consoles so far are Hellblade II, which runs at 30fps, (something more games should consider doing if they want to push technical boundaries) and Avatar Frontiers of Pandora which carefully pushes the hardware without going too far with demanding features.

It's more time consuming and expensive to do that now so while it still happens it's less often nowadays. This year and 2026 should see it happen significantly more though since many big games targeting gen 9 hardware that started development in 2019-2021 will be releasing. Death Stranding 2 looks insane for one example.

Nanite, Lumen, and Virtual Shadow Maps are expensive on PS5 and promising on PS6, but you're just not going to see massive gen on gen leaps anymore for a plethora of reasons that every nerdy forum dweller knows at this point.

The jumps will be nice and appreciable but nothing jaw dropping. It's more akin to jumping from a console to a highend PC in the middle of the generation. I no longer care that much about generations because the cool aspect about them no longer exists. Just give me great games and I'll be happy to play them on whatever I have.

I won't rule out that there will still be some games that give us that "decidedly next gen" feeling and wow us, but they're going to be super rare. "Nanite in the Land of Lumen' was bullshit as no real game compares to that in my eyes.

What I want from the next gen is better physics, hair rendering, ZERO pop-in (it gets more distracting every gen), less stuff clipping into each other, and decent image quality and framerate.