What about smart developement?

Re-use assets (textures, meshes etc). Use randomization to give textures ”uniqueness” etc.

It's untrue because it insinuates that HD platforms require HD games, which leads to the stupid conclusion that bad hardware = better because cheaper.

In the end it's a hilarious non-discussion anyway considering  that even the Switch isn't capable of running most current gen AAA games at a desired baseline quality. Which is why it will have the least amount of AAA games of any platform anyway.

This depends how on you are defining HD. Yes, taking a game from PS3/360 levels to PS4 Pro levels in graphics is ridiculously expensive and time consuming. Open up a 3D modeling program and just try making textures, models, and animations on the level of God of War, Witcher 3, or the latest Forza. 

Taking a game from 3DS levels to 2007/2008 console levels isn't nearly as hard though. Especially not if your art direction is already cartoony. 

How much detail you want to put in your models and textures is up to the developers. There is no gold standard that has to be adhered to to count as "HD". That AAA games are expensive is no question but AAA developers are not the people we talk about when we say it's so expensive.

We're talking about low tier developers and indies, which do not give much crap about visuals in the first place and still manage to create beautiful games. No developer who has ever lived or will ever live is going to complain about "too much power" on a system. The insinuation is that "poorer" developers will be left behind because they cannot compete with high value production, which is utter bullcrap. Developers aren't intimidated by powerful hardware, in fact 100% of developers are held back by weak hardware.

Of course they don't.

But it's much harder to get people who are used to beautiful looking HD games to pay a decent chunk of change for something like this

Like many others said, the collusion of HD and AAA in the OP is patently wrong.

Publishers do HD because they try to sell pretty graphics in trailers, posters and the like, the better more realistic the graphics look the more they are boasting themselves and the game. This is because for the longest time, the Publishers were running on pre-orders and needed to make them extra-shiny to ensure those pre-orders. Nowadays, that's much less true, but since the tactic worked for so long why change it? Never change a winning system, after all. But they are not obliged to make a game in super-shiny ultra-realistic MegaHD at all. Nothing's stopping them to make a game looking like Wolfenstein 3D if they wanted to.

Microsoft, Nintendo and Sony still make those, as do Japanese Publisher. The big western publishers though? Ubisoft still makes some, but EA, Activision, Bethesda and THQ don't seem to be interested in those anymore, unless you count sports titles as these.

The fact that the publishers left these fields and concentrated on their "core" franchises, combined with digital distribution, led to the meteoric rise of teh Indie scene. Before digital distribution, the Publishers were basically the gatekeepers to the market. Since then, publishers have pretty much devolved into holding companies, pretty much bag of holding of a shitload of IP they'll never use again and a handful they use over and over and over and over and over...

While slightly off-topic, I also think that calling games AAA, AA and the like is not doing justice to how games are made these days. Unless you consider that the more A it has the more expensive it gets to get all of a game between all the DLC, Microtransactions, Lootboxes, pre-order bonuses...

What other choice does a company like Compile Heart have? If the PS4 or Switch markets don't suit their games, then what? They'd have to move to mobile. That ain't easy.

You seem to believe that there is an audience that can be served which is no longer there on a traditional handheld platform.

All you need to do is look at Octopath Traveler. It's a SNES-style RPG with pixel 3D environments, yet it sold over 1 million copies worldwide. There's an audience for these games on Switch. 

Octopath Traveler is a 2D game. Apples and oranges there. If your suggestion is to move all 3D modelers/animators etc over to 2D then that will of course hurt that developer. That's not an easy switch.

Many 3DS games already have good assets (3d model complexity, textures...) which are hidden due to very low 3DS resolution.

All it would take to let them shine on the Switch would be a simple resolution boost, which is just changing a number in the default settings.

For example "The Great Attorney" (with english patch) emulated in native 400x240 and in higher resolutions, no texture upgrade or anything else:

(pictures best viewed in fullscreen)