Was Nintendo right to opt out of the graphics arms race?

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I feel like we're splitting hairs here.

Yes, the Switch 2 can handle PS5 ports, in a more intact state than past handheld ports of console titles.

Yes, they also still require settings tweaks just to account for the fact that it's physically impossible for a small device running off a battery to compete with a big box plugged into the mains.

These two things can both be true and aren't mutually exclusive.