Making something on a small budget often means smaller returns as well. A large game studio would rather make a couple of billion on a huge AAA game than spread themselves across a dozen projects which collectively won't make the same returns - even if each one is profitable. This is the same reason that movie studios love chasing a few massive blockbusters instead of investing in a bunch of smaller projects.
At the end of the day some of this comes down to market incentives. A public company is expected to grow. For a gaming company this means either shipping more games or bigger games. If you ship more games, at some point you start cannibalizing your own sales (e.g. how many different shooters can you make that would have non-overlapping audiences?) so you go bigger.
Notice this affliction doesn't affect some of the more successful private, indie studios. Supergiant Games has shipped a pretty long string of hits, but the level of production for each one is relatively constant - they're not aiming for "AAA" graphics or scale.
> Chasing fads is the laziest thing you can do, because it's easy to present to management/investors.
Totally true, but at the end of the day you have to convince someone to spend $200,000,000+ on development. You need something concrete to point at as a reason why you'll be successful.