The Switch never was and (imo) never will be any kind of performance powerhouse - Nintendo are far more interested in battery life, price point etc. than trying to deliver 120fps or 4K gaming on a hybrid handheld console.
They'll aim to deliver at a fairly sensible price point - they won't generate Switch style sales numbers with 'same thing as last time but with a bit more grunt and it costs £200 more'.
I think their biggest challenge will be convincing joe average that it's worth upgrading and delivering content that really takes advantage of and showcases the extra power on offer, when they're still clearly capable of putting decent quality software out for the Switch as it is.
For every 'gamer' with a Switch getting upset that stuff like TOTK has frame dips, there are probably 5 people whose Switches spend most of their time on RingFit Adventure and Switch Sports, which aren't going to be materially improved by making the graphics a bit better. You'll need some decent exclusive software to convince these people they need a new version of what they've already got and still works for them.