It's just a recategorization of needs, though. If utility function is $u(x,y)$ where $x$ is material goods and $y$ is non-material goods, it's reasonable to assume that both $u_{xx}(x,y)<0$ and $u_{yy}(x,y)<0$, so diminishing marginal utility in both.

So, I don't think it says anything deep about material vs. non-material desires, other than people need a variety of goods both material and immaterial.

The bigger question is the degree to which all human needs can be served by the market. People have an aversion to notions of buying love or friendship on the market, and it's not obvious that the market can fulfill those needs.