1. All the changes in AI from the past couple of years have only increased demand for MLEs. The job profile kind of widened too, - MLE has always been a subset of SWE but even more so if you're working with LLMs. So some MLE jobs will still require a lot of theory, some won't, but they all require some understanding of AI/ML. You kind of need to know what you want to work on instead of targeting specific job titles (which can be hard to navigate if you're early in your career and have no experience).

2. Overall market dynamics still apply - the increase from 1. is relative to the market i.e. if the market has been tough for other roles like frontend for example, it has been less tough for MLEs because they work on the thing that's exciting at the moment.

3. Should new grads focus on it? New grads will likely have a difficult time regardless of what they decide to do - maybe in a couple of years there won't be excitement around AI/ML, maybe there will be more, maybe something else will be hot. The overall market almost certainly be different, and that could be for the better or worse.

Hard to predict the future. Whatever you decide to do early in your career, know that you're not married to it forever. Develop general skills that can be applied in many areas.