The next 10 years are likely going to be far harder for all game hardware period than the last 10-20 years was. 

Middle class and lower income consumers are getting crushed by inflation and their wages are not growing, AI spending boom will likely go on for years forcing RAM, storage, and even general CPU/GPU prices up, even the price of silver is skyrocketing, component prices as a result are likely to go through the roof, graphics technology isn't enough to wow consumers anymore as I think really with PS4 already we reached a point where games already look "good enough". You're seeing a lot of people content with just playing older or existing games. Then you have all this tariff shit on top of that. 

The next leap will probably come via AI rendering in a completely different way from polys/textures/etc. to create photo real worlds, but I bet they are going to try to sell that as a streaming/GPU rental service essentially (as it will require a level of compute beyond what a consumer box can achieve) but in that case I kind of think the traditional walled garden ecosystem/console that Sony and Nintendo rely on will eventually become toast. AI will just take any game with basic graphics and be able to make it look as real or unreal as you want, but even more than that it will allow the user most likely to change whatever they want about a game (looks, possibly even gameplay) to their needs. 

Sony is better positioned than Nintendo to withstand the storm. They may as well sell zero new hardware for a while and their revenue and profit could remain strong. Because they have a massive existing PS4 + PS5 active playerbase that are huge spenders. The PS5 is powerful enough to possibly remain relevant and largely supported for the next 10 or so years.

The Switch 1 on the other hand is an obsolete hardware and will probably fail to retain nearly as many players as PS4 did (despite having a much larger install base). So a lot more rides on Switch 2 being a massive success that makes up for the Switch 1's engagement decline. Additionally, Nintendo has a pricing crisis to contend with. Low digital ratios, expensive carteidges, and the problems you mentioned will all be a pain in the butt. And they probably won't have a COVID like situation to temporarily boost their sales and profits.

The primary medium term challenge (next 3-7 years) Sony faces is Steam stealing their players or limiting their potential. Because like Microsoft with Xbox, they keep giving a large number of gamers less reasons to own a Playstation. So far they're doing suprisingly well, but you never know what'll happen in the long run. Xbox was looking okay when MS supported PC initially, and look where it is now! It's not gonna be as bad for Playstation for obvious reasons, but an eventual consistent decline is more than possible.

I'm not worried about AI generated gaming taking over. I think walled gardens will remain big for at least the next 20 years. Nintendo and Sony should be able to adapt, but they might find themselves forced to give cloud providers significant cuts. Japan is economically and technologically deteriorating, Nintendo and Sony will suffer the consequences.

I don't know if this super custom AI-altered experience you speak of will ever be so popular. Most people would still prefer defined experinces as intended by their human creators. Not some buggy and inconsistent AI hallucinations. And if we're talking about AI altering just a layer or two, then the changes will not really be jawdropping to the point of making traditional hardware redundant. Visuals have reached the point where even real life level wouldn't look all that "game changing'. I would argue that PS1 vs PS2/GC/Xbox visual jump is MUCH more impressive than PS5 vs real life lol. Pop in, physics, scale, and animations though still have a huge room for improvements.

For the AI thing this video gives an idea of the sort of impact it'll have down the line. It's almost half a year old so with the crazy fast rate of progress there's probably already a better version they're working on that they'll reveal later this year so I think this stuff is gonna get absolutely crazy by the 2030's and could genuinely be massively disruptive.

I don't think Nintendo is part of that whole console competition angle, Xbox 360 vs PS3 was pretty much the only thing people focused on, while Wii wasn't seen as winning that generation because it didn't run and play the same games.

PS and Xbox has been the competition, Nintendo has not been seen as being part of that competition. Only now with Xbox dropping of from consoles have some tried to make PS5 and Switch 2 competitors because PS5 is outselling Switch 2 in several markets. But Switch 2 doesn't play pretty much any of the games that dominate on PS5 looking at Circana player time, so it doesn't make sense to Switch 2 as replacing Xbox as a competitor because they don't share the same software library.

Whatever helps you cope with the fact that we have a bunch of championships lol.

We?

Sony gaming makes 3 to 4x much than Nintendo makes...  I mean if you were even attempting to be objective you would concede this fact.  

C'mon, this kind of console warring just poisons discussions, let's try to be mature about this.

Im sorry curl but what am i supposed to say to someone who says nintendo isnt even competing because they dont share a library? Or that the wii really didnt win 7th gen because the console was different? Its just being dismissive for no good reason. Seemed like bait to me honestly so i responded with "whatever"

Yes us on the nintendo side