Its somewhat difficult to directly compare Nintendo's best work to a team like Naughty Dog. Nintendo has basically been working with hardware a generation behind Naughty Dog even since the PS3 hit the market. While a game like Zelda TotK isn't going to wow anyone in 2023 based on its visuals, on a technical level, it had developers commenting on how impressive it was. The physics system was already impressive, very impressive relative to the hardware its on, but then they throw in a crazy crafting system that was probably a nightmare to keep from causing countless game breaking glitches. I believe Nintendo is very competent when it comes to their technical prowess, but even better at managing their resources. So many developers let the game get away from them and try to find optimizations towards the end of development, often coming up short of maintain the target framerate. Nintendo more often than not hits its desired framerate and holds it.
I think its fair to point out that Naughty Dog is a team on not a publisher with lots of teams. Is Naughty Dog more technically capable than most Nintendo teams? Yes, but Nintendo has a lot of teams and a few of them are top tier. Still, PS5 is out and exclusives for the hardware are going to be a thing. No matter how talented Nintendo's team is, they cant make up for a 6 Tflop deficit and CPU performance that is less than half. Nintendo will make some terrific looking but on a technical level they cant be on the same level as Sony's top games, how could they, they have less to work with.
I believe Nintendo, like other developers out there, play the waiting game, sit in the wings, and observe what others are doing before they act on how to get the most out of hardware. But since they’ve been “behind” in power since the PS3 era, it would seem the initial impression are Nintendo have no idea how HD development works, let alone 4K, DLSS, or Ray Tracing development.
I personally believe it’s not so clear cut as evidenced by what they can develop under such limited hardware; case in point TOTK as you mentioned earlier. The physics system alone is probably a masterclass in game development, and how you can really optimize, and polish the game's code to simply make things work. We're talking about a physics systems that operates within only THREE physical CPU cores (that’s on top of everything else the CPU has to calculate, and operate), and there’s a possibility they’re using some of the GPUs silicon to help assist with that too. I can’t remember a time outside of Nintendo's own IPs when a massively large open world title simply just “worked.” Now in fairness, a lot of that is due to Nintendo's commitment for polish, and only launching a game when it’s ready rather than being subjected to beancounters upstairs who are trying to meet some deadline or quota for their end of the year bonus.
That said, we know from others out there either directly in the industry, or even enthusiasts that new techniques are always being discovered and utilized. Take for example, Randy Linden, the man responsible for reverse engineering the source code of Doom 1993, built his own game engine for the SNES, and using the power of the SuperFX 2 chip, managed to get the game running on it. There’s a fantastic interview with Digital Foundry almost a year ago that is a great deep dive into game development, plus he even mentions how he heard of a new technique from a programmer that may actually give you more performance today with Doom on SNES (Skip to before the 15min for that relevant part)
Of course, that was in the 90s during the height of the SNES' popularity. We’ve seen since the 90s that enthusiasts are finding new ways to either optimize an existing game on a platform, or simply develop a brand new title so it works on native hardware. As for the latter, there was Micro Mages for the NES, which for an actual NES title looks absolutely incredible for 8-bit.
As for the former though, there is the wizard that is Kaze Emanuar who “fixed” Super Mario 64's source code to get it running on real hardware at a full 60 fps. He has since worked on building his own levels that'll work on real hardware using the techniques he's worked on over time, but here’s the one with him explaining him achieving triple the FPS for Mario 64:
I know you’ve seen these videos before, GT, but for others, this is a great way to kill an hour of your time to show what was possible back then, and what is possible now given new discoveries after the fact.
I suppose what I’m getting at is just because Nintendo, or other developers for that matter don’t have the latest and greatest hardware, doesn’t mean they’re necessarily behind the competition. More than likely, they’re discovering new ways and techniques in the background on how to optimize their games even further than what most developers were working on back in the day. We’ve seen what Zelda TOTK can be with hardware that is effectively a PS3.5. Imagine what they can do with a PS4.5.
As a side note, had the GCN been more popular for example, I think a game like GTA3 would’ve been possible under the limited storage requirements, either by using multiple game discs, or even a single disc. Same goes I believe with other games that at the time were deemed too large to fit within the constraints of the GCN's 1.5GB disc. And who knows, maybe some enthusiast has thought of that very thing. Same is true for the Wii U. Yes, it’s hardware was “outdated” by the time it launched, but that doesn’t mean it was particularly slow. It did not have the grunt of the PS4, but I think through some optimizations, even a game like Doom 2016 for example would’ve been theoretically possible, say the Doom SNES of the Wii U. But that’s just me saying this without any programming experience. Since the Wii U is now more of a system for the homebrew community, I wonder if we may see certain games, or demos down the road. It’s interesting how many late gen PS3 titles really were too much for those systems, but I’d be curious how with a more modern GPU, more available ram, plus the EDRAM pool, how some of these titles would’ve faired.