Quite frankly, I don't think that's true.

We've got games coming out at the moment that use Unreal 5 and it's next gen features that are still coming out on the S like Immortals or Remnant 2. They have reduced fidelity on the S as expected but they still run fine there. BG3 is literally held up over one issue, the split-screen, that they're apparently still working on to see if they can patch it back in post launch, MS clearly just let them launch without it to take a win back from Sony.