The upcoming firmware update will increase the CPU and GPU temperature threshold to reduce false overheating alerts.
Valve Raises Steam Machine Red LED Temperature Warning to 100°C for Both CPU and GPU in the Upcoming BIOS Update
Some reports suggested that users were reportedly seeing the Steam Machine's red LED indicator while stress testing or playing demanding games. While the built-in feature exists to protect the device from overheating and thermal throttling, the current limit is way lower than the max operating temperature of the hardware.
As per a user's report, the light bar on his Steam Machine turned red during gameplay. The screenshot shows that the GPU was operating at around 75°C while the CPU was at 81°C, which were under the safe operating limits. At the moment, the Zen 4 and Zen 5 chips are designed to operate safely at around 95°C under sustained load, but since the Steam Machine can alert the users before reaching this threshold, it can cause interruptions for no valid reasons.

After discussing with our engineers, there is a known issue with the current BIOS that results in the red LED lights displaying much earlier than they should.
The issue is just with when the lights are set to come on. The Steam machine itself is within normal operating temperature for the CPU/GPU, which they confirmed from your screenshots. For your awareness, the Steam machine will start throttling performance at 100 C for CPU/GPU and will shut down to protect itself if temperatures rise past that.
A BIOS update is being worked on to be released soon that will fix the red LED light behavior to be at the 100/100 C for CPU/GPU instead of 95/90 for CPU/GPU th;at is currently happening.
- Steam Support
Valve is therefore preparing a new BIOS update for the Steam Machine that will change when its lightbar triggers a red overheating warning. As per the confirmation by Steam Support, Valve's new update will raise the CPU and GPU temperature threshold from 95°C/90°C to 100°C. Yes, the same limit will be applied for both components and will be implemented soon with a new BIOS update.
As per Valve, Steam Machine starts to demonstrate performance regressions when either the CPU or GPU reaches 100°C, which means the current thresholds of 95°C and 90°C are much safer. Keep in mind that this red LED warning is different from the GPU failure, and the memory training Steam Machine begins after the BIOS update.
News Source: Reddit
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