As long as dGPUs keep the performance lead and there's gamers who really want a lot of graphics processing power to make games look pretty then people will continue to dump money into them and they'll be a viable business model.
dGPUs have never been "for the masses", the PC gaming space is very niche and for enthusiasts, it might be that most consumers (casuals) will flood to the tablet market and survive off slow iGPUs but who cares about them, they can stick to their 8 year console life cycle and locked in proprietary consoles/tablets, the people who really want quality will always go for quality and they'll pay through their nose to get it.
It's like saying that 5 star restaurants are going to go away because McDonalds are so much more efficient and appeal to the lowest common denominator, sure they serve billions of people, but people who are looking for a really decent quality dining experience are going to pay a lot to go somewhere nice and get a good meal.
I've also said this before, but the consoles piggyback off the success of the PC, it's a fundamentally parasitic relationship, they have hardware cycles of 6-8 years but in a relative sense they put next to nothing into R&D for those years, they simply let the PC gamers field the costs by continuing to buy and finance the aggressive cycle of PC graphics hardware every 18-24 months. Then 8 years later simply take something mid-end and tweak it a bit for their needs. So if the aggressive lifecycle of GPUs goes away then consoles are going to suffer immensely, their business model of being cheap and going into every living room will simply vanish, or be changed beyond recognition.
The dGPU market may shrink, but it's not going to go away as long as PC gamers want to power the next greatest thing, currently in a lot of computing hardware is now a solved problem, modern work/home desktops and laptops have way more power than they need but in the gaming space it's still a rat race to achieve that extra performance.
iGPUs are getting better but not a rate that's fast enough to let them close the gap between what we have now and dGPUs. I think Linus is basically talking rubbish here, but I guess time will tell.