You can achieve a lot by specifically optimizing your game for a particular machine and Valve has such extreme market power that every game studio releasing on PC will make sure that their game looks and runs great on the Steam Machine.

This machine is more limited than I expected e.g. only 8 GB VRAM, however because of Valve's market power all game studios will see 8 GB VRAM as the new limit. Every game will now aim to look and run great with only 8GB VRAM.

As a poor gamer, I truly appreciate Valve setting such a low standard for gaming PC hardware. Game studios were certainly already looking at 16 GB VRAM + 32 GB RAM as the new standard for AAA games. That is now history.

It could have been something, but the target market is precisely the market that will look at the price and say "Nah".

And as one point of clarification, game makers by and large still aren't targeting Linux. This machine works via the absolutely excellent, almost magical Proton (https://github.com/valvesoftware/proton) that lets you run most of your Windows library on Linux, largely seamlessly.