Part of the problem is the lack for AAA studios to take big risks. They keep iterating on old ideas that do not take advantage of powerful hardware. The exception to this is photorealistic graphics, but that obviously limits the type of games that can be made. Only games like GTA 6 will be leveraging hardware in this way, but for most other games the graphical ceiling has been reached. Most games have more than enough resources to render whatever art style they want, barring photorealistic details.

The innovation that needs to happen is along the lines of leveraging lots of physics and entities in real time. I'm talking about zombie games with thousands of zombies on-screen, or RPGs with towns that have a realistic amount of NPCs, all of which can be interacted with at some capacity. The problem here is that this currently isn't leveraging GPU as much as CPU resources, but it doesn't have to be that way, especially with the new AI pipelines.

That said, consoles are now glorified gaming PCs. The advantage back in the day was that it provided a platform for developers that was already optimized and designed for games, but software tools have matured enough that this can be achieved in any hardware with engines like Unreal.