AAA games are expensive. The rise of HD assets and increased audience expectations from more powerful hardware leads to higher costs and longer development times. Nobody was immune from this, and in the case of the big publishers, things only continue to grow worse. But as far as games in general are concerned, games are actually easier to make than ever these days thanks to the flexibility of modern game engines and the simplicity of console hardware these days. What would've needed a large budget with 40-50 man teams on the PS2 or even the 360, can now be done by just a dozen programmers in Unity or Unreal Engine within the same time frame on a budget of peanuts.
Now in the case of the Switch, an argument for handheld style games taking long to arrive and in less numbers is HD development. The more powerful nature of the Switch means there'll somehow be less "Handheld" oriented games from developers. However, I don't think this argument considers the full picture. Now yes, the hybrid nature and increased expectations of the Switch does mean that production values and gameplay that would've been considered acceptable for a AAA 3DS game, now needs a larger team size and budget to get games out. Case in point, Fire Emblem: Three Houses, which had to be delayed twice due to a new engine and increased production values and gameplay changes. IS even had to bring in Koei Tecmo to help get the game out. What was once considered AAA on the 3DS, now needs an even more AAA on the Switch.
But the death of mid-budget games IMO, is an exaggeration. For these games, HD development is a non-issue. As I said, games in general are easier to make now thanks to the versatility and abundance of game engines on the market these days. Just look at Octopath Traveler as an example. A mid-budget game that happens to have sold over a million on the Switch thus Far. Hell, Square Enix in general is a good framework to look at since their Tokyo RPG Factory Studio puts out unique, smaller scale games on an almost annual basis. Then you have multiplatform titles like Sonic Mania, Mega Man 11, Valkryia Chronicles 4, and Civ VI, which are just as good as anything the DS or 3DS could have.
Going forward, I think "Handheld" style games on Switch will come in the form of AA multiplatform titles. Less so exclusives since unless it needs the Switch hardware, you might as well bring your game to every console when porting is so easy. And as AAA games continue to shrink annually due to ever increasing development times, prioritizing cheaper to make projects will be more of a priority for major publishers, especially Japanese publishers who are already moving towards this.
So while AAA 3DS projects will need larger teams and development cycles on Switch, AA games as a whole generally wont.