I agree with this mostly, but at the same time more powerful hardware lets the devs experiment with more advanced mechanics. For example, ToTK runs pretty hard into switch limitations with its impressive physics. If Nintendo wanted to take that engine even further, they’d likely need a hardware upgrade.
Additionally, more powerful hardware starts putting more demanding mechanics into the realm of possibility for an indie dev team that has neither the time nor the resources to optimize their games at the same level as a big studio.