There is enough natural human variability that some people make deep human connections with others regardless of material needs. For example, happy parents of young children love their children intrinsically and not because the children can perform useful tasks for their parents. Likewise I love my wife dearly even though there is no useful task she can perform that I cannot.
There is also enough variability that some people are quite happy competing with themselves, or with other humans, in fields where machines have long surpassed humans for all practical purposes. Steam powered machinery has been able to travel faster and lift heavier loads than humans for more than 200 years now, but people still run foot races and compete in weight lifting competitions. If the sort of people who need to feel better than machines fall into despair and fail to reproduce, future generations will become increasingly dominated by the tendencies and offspring of people who didn't despair. 10 generations hence, people will still run foot races. Perhaps a larger proportion of people will run foot races then than do now, simply because there will be no pressure to spend one's time on "practical" things once AI can do all of them.
