For Svelte as an "island" tool (i.e. for building islands of interactivity in otherwise static pages, like, say, graphs for the New York Times), that's not a problem, because the extra generated code is made up for by the lack of a bulky runtime dependency. But if you scale that up to complicated SPAs - which has been Vue's main stomping ground - you can end up shipping larger files with Svelte than with other small frameworks.

That said, SFCs in Vue are an ideal source for compile-time compilation, and my understanding is that they're heading more down the route of SolidJS. SolidJS has a similar goal of using a compile step for optimisation, but it leans on its signals library implementation much more heavily, which means the compiled code tends to be much smaller, but you also need to include a runtime. (In practice, there's not much size difference between Svelte and SolidJS at all, but it shows itself at the more extreme ends of very small components and very large apps.)

Vue already has a runtime that's very similar in some ways to Solid's (read: it's all signals, baby), so adopting the rendering ideas from there is an obvious next step. That should drastically speed up rendering, as well as reducing bundle sizes significantly. They've already demoed this a bit, but I think it's not fully released yet - they gave a name for the new system, but I've forgotten what it's called.