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.

I just tried here, in Denmark on a pc shop I like to use.
new Parts (but cheapest, equal or better than steam machines)

rx 7600 ~1900 kr
Ryzen 5 3600 ~340 kr
Asrock MB ~370 kr
kingston fury beast ddr4 dual kit 16gb total ~670kr
pc case ~200 kr
psu ~200 kr
cpu cooler ~150kr
ssd NVMe ~180 kr

= ~4000 dk kr  /  ~600$

That is without keyboard/mouse/OS.... just a case + hardware, but beating the Steam Machine in performance.
You can do that for like 600$.

That's with you paying consumer prices, that enables the hardware store to make profits selling them.
Valve can buy parts much cheaper than you or I, as consumers can, from stores.


I'm curious what does "AMD Radeon RX 7600" + "Ryzen 5 3600"  + "cheapest DDR4 dual kit (16gb)" cost in sweden?
if you look at a shop that sells them cheap?  (I listed the prices above, from the shop I picked)

edit:

currently non black friday prices (here):

PS5: Slim Digital (fc 26 bundle) 3899-3999 kr (585-599$)
PS5pro 2TB FC26 bundled: 6399 kr ( 958$ )
Xbox: Series S : 2699 (404$) 
OG Switch (oled) 2699 (404$)
Switch 2 (w/ mario kart world): 3999 kr (599$)

Denmark doesn't have a chemical tax, it makes quite a difference. 

The Steam Machine has DDR5 RAM, 16GB of DDR4 can be bought for around 80-90$ here, but 16GB of DDR5 is 140-150$ and up. The cheapest RX7600 I can reasonably find is around 300$. As for the CPU, a 5600 is closer in performance, I can find some for around 150-160$ (5600X). I could get these three components for about 600-ish dollars, maybe 570-580 with deals and looking around more. The cheapest 2TB M.2 drive I can muster is about 130-140$ on top. With a basic motherboard that still allows for HDMI 2.1 or DP equal, a PSU, chassis and smaller details, I'd be hard pressed to get a build for less than 850-900$ around here, and that's pushing it, it would also mean picking the lowest possible configuration in several areas (motherboard, RAM, M.2, PSU). A more realistic tally is closer to 1000$.  

I shop at computershop.se (Swedish branch of a Danish vendor) sometimes, they have decent prices from time to time, I actually bought my monitor there in 2023.  

I remember buying the 980Ti for around 750$, and it ruled the world. Those were the days. Looking at prices now makes me sick. A single flagship GPU costs two-three times what an entire, decent build did a little over a decade ago. My 980Ti rig from 2015 was around 3000$, including monitor, keyboard, and mouse (so about 2400$ for the rig itself). My 4090 build from 2023, with a similar performance profile for its time, was around 7000$, all things included.

It's basically a budget gaming desktop right...so I'm thinking $800-$1000.

Steam Deck is $400 to $650, I would certainly think the Steam Machine would be more expensive than the Steam Deck. So I'd put the Steam Machine at $700 absolute minimum, but probably $800, and perhaps a large SSD model at $900.

This is not supposed to compete against consoles, so $800 is not a nail in the coffin. It's supposed to compete against budget gaming computers. Just like Steam Deck wasn't supposed to compete against Switch, it was supposed to be a budget somewhat portable gaming PC. And just like Steam Deck this is a niche device that'll sell millions, not tens of millions like consoles sell.