Realistically it wasn't even "We only have X dollars to spend". They needed the console to have a final budget and they really could have "just" added more transistors dedicated to that texture unit without significantly altering prices or profit.

But hardware was actively transitioning and what we "knew" one year was gone the next and Nintendo was lucky to have made enough right choices to support enough good games to survive the transition. They just got some bets wrong and calculated some tradeoffs poorly.

For example, almost everything Kaze is showing off, all the optimizations were technically doable on original hardware, but devs were crunching to meet deadlines and nobody even thought to wonder whether "lets put a texture on this cube" needed another ten hours of engineering time to optimize. Cartridges needed to be constructed by Christmas. A lot of games made optimization tradeoffs that were just wrong, and didn't test them to find out. Like the HellDivers 2 game size issue.

Sega meanwhile flubbed the transition like four different ways and died. Now they have the blue hedgehog hooked up to a milking machine. Their various transition consoles are hilariously bad. "Our cpu and rasterizer can't actually do real polygon rendering and can't fake it fast enough to do 3D graphics anyway. Oh, well what about two of them?"