If that's the case, AMD should just drop dGPU and make entire gaming focused box, where they could do something much more interesting. Think console like design (so leverage their advantage of being in the consoles), but be less constrained than the consoles (by pricing and power/thermals), with the ability to be more flexible (so give us a single 8c/16t CPU chiplet, a GPU chiplet, and then between them an I/O chiplet on an interposer with 16GB of HBM2 (2 8 hi stacks with ~300GB/s per stack), and then say 128GB of NAND offering ridiculous bandwidth where it'd have the OS and then can swap an install of a full game for max performance (and when you're done playing the game it could be swapped to lower speed storage like SATA or even USB3 SSD or HDD). Sell that for $1000. Then have tiers (say a $1500 one with 12 cores from 2 CPU chiplets, a larger GPU or second GPU chiplet if they get that worked out, 24GB from 3 stacks of HBM2, 256GB of NAND; then a $2000 one with 16 cores, more GPU, 32GB from 4 stacks of HBM2, and 512GB of NAND). Put it in a small box with a self-contained liquid cooling, so that you could make some interesting design while keeping noise low and thermals in check. Work with Microsoft to tailor Windows for it (especially gaming performance). Partner with Valve to develop a gaming focused Linux distro and sell it as a Steam Box (with maybe some special version for VR). They could even sell higher end versions as workstations. And that'd be a great cloud gaming box when that becomes more the norm. With the I/O on an interposer being the main difference it could scale almost directly with the market its intended for, with the much higher workstation ones being on larger boards for more CPU and GPU chiplets (and the related IF links, larger interposer, and more NAND). And I think it makes their hardware shine in performance, limiting the bottlenecks as little as possible.
The cost for consumer should be about the same as buying a complete system, but with higher performance in a smaller packaging. I'm not sure it'd cost more for AMD (and they gain more control over the whole platform which means they can make a system that is more appealing to consumers, and thus then let OEMs just glitz it up in whatever packaging and/or pairing with peripherals (so Dell pairs it with some monitor of theirs; Razer pairs it with their peripherals; others can do VR headsets, etc).
I think that could potentially stave off the move to cloud gaming while the rest of that infrastructure develops. Plus console development would be able to transfer over to PC (and be something that Nvidia and Intel couldn't take advantage of) more so AMD should gain a big advantage in optimization, and I think it'd push the overall gaming performance (I think the memory bandwidth and NAND would allow for ridiculously high quality textures and other pre-rendered assets, which when paired with some pre-calculated path tracing I think could offer ray-tracing quality without the real-time performance hit, so you pre-process what lighting would look like using high quality ray-tracing and then you save that as image textures and swap them in based on the lighting situation - which you could maybe even do base texture layer and then have texture masks that overlay it that have the reflections or other similar highlights/shadows so you can store less overall data, and perhaps you could warp the mask layer for perspective and other aspects, kinda like bump-mapping where you could give the illusion of depth).
So if the consoles moved to be more PC like but with some optimizations that the PC space hasn't realized, make the PC gaming stuff more like high end versions of the consoles (where you get the console advantages, but paired with the higher end PC parts), as the current situation actually makes things more wonky (and the PC space takes the console advantages and then makes them even better; while being able to offer the better hardware that PC space traditionally offered as well). The console companies shouldn't be too mad as it means they'll have the most cost effective version of that and an easy path to improve on should they decide they'd like to offer newer systems sooner. Plus they'd have their own lock-ins still, and potentially they could maybe transition so they don't even need to fund the major development (cutting their R&D costs), and transition to more potential users by porting outside of their install base (meaning, Sony could turn Playstation into a service and have it be on more than just the Playstation install base; Microsoft already is moving that direction and Sony arguably is as well as they've been doing development and porting to Android of like PS1 era games and Playstation Vue). And its not like they lose out really, as they could still be the publisher of games, but now they can sell even more than they would have with the games locked to just their platform. And they shouldn't be losing money on the console hardware (they might not make much profit from it, but they shouldn't lose money while it being how they would've treated any other electronic device, VCR, DVD player, HTPC, etc that both companies have tried repeatedly over the years).