It might be expensive, but it's not overpriced

XDA Developers

Valve's Steam Machine carries a $1,050 price tag that has drawn comparisons to the $500 PS5, but the cost is justified when examined through the lens of small form factor PC building. Mini-ITX motherboards, SFX power supplies, and compact chassis components all carry significant premiums over standard-sized equivalents. On top of that, the current PC component market is experiencing surge pricing driven by AI-related enterprise demand for DRAM and flash storage, pushing RAM and GPU costs to record highs. A component-by-component breakdown — mini-ITX board (~$140), 16GB DDR5 RAM (~$85), 512GB NVMe SSD (~$65), SFF chassis (~$120), 300W SFX PSU (~$90) — shows the hardware alone approaches the asking price before accounting for custom thermal engineering, vapor chambers, and the value of SteamOS as a polished living-room OS versus Windows 11.

The Steam Machine costs $1,050 because building a gaming PC that size isn't cheap

Comparing the specifications makes it clear

The performance bang for the buck is really not the focus of this device.

Now it’s because of the form factor?
Dude it’s a complete computer, people only compare it to PS5 because of the console-in-the-living-room use case, but it’s an unblocked, fully operation Linux computer with good drivers.
Still don’t know if this will succeed. I would rather buy my own parts and build my own computer for developing and occasionally gaming, but what they produced with this product is nothing short of amazing.