No, their are recent games, Forza Horizon 4, Gears 4 and 5, all big AAA games, the most recent Tomb Raider is there, lots of huge AAA games both old and new are on it.
Has it occurred to you that maybe not everyone cares for AAA games? Sure, they may have higher production values, but what games people like to play is really down to personal preference.
There is also the issue of accessibility. If I am waiting for a bus or in the toilet with a few minutes to kill, which game do you think I am more likely to play? Games like Forza or Gears likely require me to set aside 2-3 hours at a time, something which not everyone has the luxury of.
Or in the very least, they don't sound mutually exclusive. I can play those AAA games on weekends when I have an afternoon's worth of spare time to kill, while Apple Arcade is there to fill in the gaps on normal days.
In a way, this reminds me of the whole AirPods saga all over again. The self-styled audiophiles claiming how the AirPods were a flop because of their supposedly lacklustre sound quality, while the consumers would go on to buy AirPods in droves because of the convenience and ease of use that they offered, and they were fine with the sound quality.