I don't think their intention is to win over the console user, but to offer a new way to experince Steam (games). Although, as Playstation and Xbox are becoming online services, this is how Valve reacts to new competition.

Aside from no screen or battery, which is granted does not completely overcome the power difference; it will simply struggle to sell otherwise.

I see your point.

Its just if they sell like 3m at 150$ profit on each unit sale....  vs 20m (or more) sold at 50$ profit on each unit.
I always assume these giants want to own the space they are in.
Not like valve is short on money anyways, they earn billions every year.

They have a chance of making history with the steam machine.
A chance to actually take market share away from Microsoft, and windows.
They can change history,....   That sounds way cooler, than pocketing some extra money.

Gabe isn't lacking money right?
Guy just spend like 500m+ on a super yacht..... and that peanuts to him.
What good does more money do him? when he probably already has more than he could ever spend.

I'm kinda rooting for the under-dog here.
I wanna see this thing take off, and sell really well, and maybe make linux or steamOS a real competitor to microsoft / windows.

For the Steam Deck comparison something to keep in mind is for early 2026 standards the Steam Machine will be a lot weaker than the Steam Deck was for early 2022 handheld device standards. The SD was pretty capable when it came out while this will already be kinda low end when it releases. The ideal would be £449/$499 for the 512GB model and 100 more for the 2TB one but with how rough the market is £549/$599 is likely the lowest you can expect for the former. That pricing would still be fine but any higher would really hold it back from having much of an impact.

It’s not exactly price related, but more intent. Who is the target audience for this device? Is it people already in the steam ecosystem like PC users or steamdeck users or is it intended to pull users away from Sony, Microsoft, and Nintendo?

$800

As much as I'd like it to be console-level price, it's going to be around 1k. A bit too much when I already have a PC, but someone who wants a cheap replacement for theirs, or starting PC gaming without much hassle, it seems reasonable.

$699 for the 512gb model.

I picked a few equivalent parts at stores here (Sweden) and ended up at around 700$ for GPU + CPU + RAM alone, I would easily end up at or over the 1000$ dollar mark in total for a "Steam machine" DIY build here. Prices have gone insane. And, as mentioned, look at the price of Steam Deck - the OLED model costs around 800$, there's no way they'll sell a much more capable machine for 25% less, or even lower. 

With tariffs, chemical taxes (yes, we have those around here), insanely inflated RAM prices, and the remnants of the GPU gold-rush keeping prices high across the board, hardware is very expensive, especially in some regions. There's no way I can see Valve selling this for as little as 500-600$, despite what we might want or think. As for value proposition, if the smartphone era has shown us anything, it's that perceived value has very little to do with actual cost and everything to do with image. 

Other prices for comparison (in this region of the world):

Switch 2: around 600-625$
OG Switch: 450$ (OLED model, but still)
PS5: Slim Digital - 680€, Pro 2TB - 1030$
Xbox: Series S - 470$, Series X - 690-750$

With the above pricing in mind, and aforementioned prices of hardware in general, there's simply no way or scenario where I can see the Steam Machine being sold for as little as 500$, or even 600$.

Would it be DOA? It's entirely possible, Valve have tried and failed at this before, and they've never been a hardware company. Valve has never made any one piece of hardware that sold very well, they're mostly niche products for a select few customers. Lacking the same name in the space of pre-built or all-in-one solutions, I think Valve might have a hard time making a big impact on console demographics regardless of pricing, I'm not sure this is their plan to begin with. If I were to guess, this is all about selling peripherals, handheld machines, and getting new users on Steam to drive traffic and game software purchases (all sales on Steam benefit Valve greatly). The vision might not differ all that much from Microsoft's - create incentives to get customers on the software side, first and foremost, Valve is a software company above all.

$649-799