Yeah but it's somewhat hard to determine how difficult a challenge it actually was to produce that piece of code from the outside. It may be a signal of competence, or it may be one of those things that seems really impressive but they actually just followed a youtube tutorial that explained most of it step by step. (Which is a fine solution if you found that for a particular problem you had to solve, but it's not a reliable signal they'll be able to solve arbitrary things in the future - not everything has been explained by someone else, especially when trying to tackle very novel problems.)

The point is that code challenges are a pretty hard to fake test and the loss of some types of people is worth it for the employer (like me, who sucks at them).