Nintendo has never needed to compete on frame rate or vRAM to be successful
It's hard to cross-port from PC/PS/Xbox to Switch because it is so far behind. Not impossible, of course, but if you're choosing to target Switch from the start you're often committing to building your game on all platforms without using some modern technologies or new engine features. If you're backporting from a more powerful platform then you might need to make significant (expensive) changes to get it running.
It's mostly a developer cost calculation, but one that can keep new titles away from the Switch.
(Could GTA VI run on Switch 2? I'm pretty sure Nintendo would want that even if it's not their traditional user base.)
Nintendo has correctly decided that if it can attract all the low requirements indie titles plus offer its own games, then it has an extremely compelling product. Which it does, it outsold Sony and Microsoft combined.
Modern PCs, PS5 and Series X have greater resources available and newer hardware that allows for more advanced shaders, among other things, which are simply not performant or even possible on the Switch.
If you want to support these features AND support Switch or low-powered devices as well, you are making the business decision to build and maintain two codepaths and to duplicate, rework and maintain a second set of assets.
The cost often doesn't work out, so the choice is either support Switch and don't have a game that looks as good as contemporaries (a reasonable choice for indies, but graphics do sell games), or to ignore the Switch (maybe hire a studio to back-port it later if it does well enough).
Games companies and Nintendo would love for more big titles to be on Switch.