A SWE who has always worked in DevTooling companies will always be preferred by DevTooling companies over a generalist. A SWE who has always worked in AdTech will always be preferred by AdTech companies over a generalist. etc etc.
Software fundamentals - though useful - are table stakes skills at this point. No business wants to deal with the headache of on-ramping employees who have never worked in a specific domain or industry because it takes too long for a generalist employee to build the intuition needed to understand that segment of the industry.
I'm having a difficult time even seeing what we're talking about here. I see "seniors" in our industry that don't know what I would call the fundamentals of programming or software development; apparently not all fundamentals are created equal.
Historically, startups were the traditional path for a generalist to build domain expertise because most startups couldn't be picky with talent, but the market has changed.
In all honesty, too much fat did develop in the tech industry over the last 6 years. Traditional hiring pipelines (eg. Limiting early career recruiting to grads from top 10-20 CS/ECE/EECS programs nationally along with Vets and some grads from decent regional programs) still net good calibre talent worth their weight in gold, but others just aren't working out.
On the other hand, hiring a mid-career SWE who spent much of their career in one domain who is transitioning to another is a significant risk without additional social proof such as referrals where someone actually vouches for their skills.
The usual sickness. If you don’t train people to become specialists and just expect them to fall from the sky, it’s only a question of time until you run out of specialists.