Correct, as stated above power smoothing is only about the power NUMBER being displayed (and not power charting).
I’ll go out on a limb and say the typical use case for “power smoothing” is someone NOT using Erg mode - where the goal is to make power NUMBER match the target power of the interval. Because power changes rapidly up and down (even in erg mode), having a 5 second average being displayed makes it easier for non-Erg users to avoid “chasing” a rapidly changing 1 sec power number.
In other words, during a non-Erg workout the goal is getting the POWER and TARGET numbers to match (and NOT making a perfect graph).
This is the same reason I have 10 second power on my head unit when doing intervals outside - I can glance down at 10 sec average power and not chase a rapidly changing up/down power number.