To be fair: Microsoft has the most powerful "local hardware" out there right now, with the One X. Though, having both a One X and a PS4P, while multiplatform games like RDR2 definitely look better on the One X, there are some games (like GoW or HZD) that, to my eye, look better than anything the One X has. Their rumored next-gen hardware (keyword is Project Scarlett) has two rumored consoles codenamed Lockhart and Anaconda, which aims to bring One X performance to a lower price point, and introduce a new console even more powerful than the One X.
In other words, they aren't giving up on local hardware; Microsoft is big enough to do both.
More opinionated point here, but I really think this current generation will go down in history as the most interesting console generation of all time. Its the first generation that's felt like every player is just innovating their fucking heart out and truly pushing what consoles are capable of, while simultaneously releasing literally the highest quality games ever made during any generation. We're in a golden age right now.
With Stadia and, honestly, Apple Arcade kind of competing in the "next generation" of consoles, there are more players than ever, but the narrative will still be driven by Sony and Nintendo. American tech companies get a lot of mindshare, but the reality is that every single Playstation couch console has outsold every single Xbox console, even if you compare cross-generation. PSN is the world's most active gaming community. The reason is the Games. American tech companies get SO DISTRACTED by all this technology and value add services, but American companies just don't get the games right, especially this generation. Stadia can throw money at the problem, but Microsoft has been doing that for years and all they've ended up with is their Three Big Studios (343, The Coalition, Turn10/Playground). Compared to the breadth and more importantly quality of Sony's and Nintendo's studios, the attempt isn't enough. Stadia just can't enter at the 11th hour and expect to do better.