The fingerprint is a third factor. Your password is the first. The physical key is the second. And the fingerprint is the third.
If your fingerprint is compromised, this system reverts to the security of a 2FA system with a normal physical token (i.e. very strong).
You plug the key into the Windows PC, and you put your fingertip on the sensor and you're signed in. That's two factors, "Something you have" and "Something you are" not three.
For your AWS sign in obviously it won't need a fingerprint and so it'd be kind of silly for the demo to be "this more expensive product works like the older cheaper product you already have" they wanted to show off the new feature which is the "resident credential" user verification mode.
It can prevent someone that gains physical access to your yubikey from easily using the device. It might not stop a very advanced attacker, but it at least makes things more difficult.
The fingerprint is not a password replacement. The yubikey is a password replacement. The fingerprint prevents a random person from using your yubikey before you notice that it’s gone and you revoke it.
And the fingerprint is absolutely not a good password replacement.