It's an interesting device but I think the Steam Machine is a harder sell to most people than a Steam Deck - the Deck offers something genuinely different - a portable gaming PC that isn't a laptop.
As someone who already has a gaming PC (as you would imagine is probably the case for the majority of Steam users), do I really need to buy another gaming PC, even if it is nicely pre-packaged with a different OS? Not really, it would be a massive luxury just to have it plugged into the TV instead of a monitor - i'd probably rather put £400-£500 towards getting a nicer (OLED?) monitor for the PC I already have.
There will no doubt be a small portion of the customer base ready for an upgrade that consider this instead etc. but I struggle to see the popular market for this one compared to the Deck.
Edit - I suppose there's the market of console gamers with no PC history that they're going after, maybe there's going to be enough interest from that market in a ready out of the box PC of some sort.