It makes sense to me. Nintendo's always been stronger in the handheld field so bringing that to a home console is valuable, as the Switch success has shown. This method mitigates a few of Nintendo's biggest issues - 3rd party support, as games will have a selling point on their machine despite weaker graphics. Then you also have the combined efforts of their home console and handheld studios, which will ideally minimize software droughts. You also have the potential for redesigns which can churn out even more sales.
You DO have the issue of "putting all their eggs in one basket" financially, though unified Nintendo and 2nd/3rd party support behind a single device makes a failure very very unlikely. And besides, they can continue to make revenue through other means like more Classic/Mini consoles and mobile titles.
"We hold these truths to be self-evident - all men and women created by the, go-you know.. you know the thing!" - Joe Biden
