I'd argue XMPP is less ideal than Matrix because groups are located on a single server, which makes them easier to take down than Matrix' replicated state.

That is true, but it's never been a problem in my relatively long experience with XMPP: some server software can be used as a cluster and distributed, making it highly available (basically, the whole of WhatsApp runs on a fork of ejabberd), and the comparatively tiny resource usage of XMPP contributes to its stability.

XMPP does have a spec for F-MUC (distributed rooms somewhat like Matrix, many years before Matrix) and my rationale as to why it never picked up despite a whole decade of "competition" from Matrix is that it's a problem that just doesn't need solving. The price to pay for it is hefty: Matrix resource usage (bandwidth, CPU, RAM) is insane, its protocol complexity makes it a single-vendor implementation (which is risky on very practical grounds), and it's not even bulletproof for the niche use-case it set to tackle: in the end, your identity server on Matrix remains centralized.

You can tell that I'm partial to XMPP, but that's only after having been a service operator for years, with my original expectations largely favouring Matrix.