Developers are going to be more productive, just not how you think. If history is going to rhyme, then the software industry will enter into a self-serving productivity craze building all sorts of software tooling, frameworks, ralph wiggum loop variants, MCPs, etc. much like the surge in JS frameworks and variants in the past. Most of those things will not have any business value. Software devs, myself included, love to do things "because I can" and not necessarily because they should.

Smart organizations will not just deliver better products but likely start products that they were hesitant to start before because the cost of starting is a lot closer to zero. Smart engineering leadership will encourage developers into delivering value and not self-serving, endless iterations of tooling enhancements, etc.

If I was a CTO and my competitor Y fired 90% of their devs, I'd try to secure funding to hire their top talent and retain them. The vitriol alone could fuel some interesting creations and when competitor Y realizes things later, their top talent will have moved on.