Comment by ksec
Adding a bit more context.
Nvidia got the bid for Switch when they were basically dumping those unwanted Tegra to Nintendo for an incredibly low price.
Xbox and Playstation dont earn AMD much profits at all. AMD had this Custom Processor segment to barely keep them surviving, people may forget AMD was only worth ~$3B market cap in 2016. They are now at ~$250B.
On the subject of software compatibility though, one thing I got it wrong was my prediction of having AAA titles on Xbox and PS would have helped AMD's market share on PC, given those titles are already optimised on Xbox and PS anyway. That didn't happen at all. And Nvidia continue to dominate.
Sometimes a low margin business is all you need and have to keep the lights on, don't hemorrhage too much people and stay afloat until you get better winds.
Traditional MBA thinking sometimes is too short sighted. For example, PCs might not have been a Cash Cow for IBM, but the Thinkpad brand, the distributor relationships and the customer may had helped IBM more than the cash out selling this business to Lenovo. Maybe having a healthy bridge head with a popular brand of laptops could have helped IBM coming up with some innovative way of selling the overhyped Watson.
The same with AMD and videogames, it paid the bills, paid salaries and left a little profit on the table to be invested. Probably it helped them bridge from their hell days to what they are today.
There's a lot of intangibles and hidden symmetries, serendipitous opportunities that are frequently overlooked by our bean-counting master race overlords.