According to numerous leaks from insiders, Nintendo Switch 2 will be 100% compatible with your existing library, even on physical devices.
Resetera user ‘Ridley327’ writes:
Switch 2 won’t do anything special for games, so games that are virtually flawless already like Smash or Super Mario Bros. Wonder aren’t going to go past 1080p60 without some kind of update to go past those numbers. For games with a more checkered approach to resolution and/or framerate, however, the extra power on the new system can be put to use to put those on the upper boundaries more frequently and consistently, so games like Bayonetta 3 or Xenoblade 2 would be running and looking a lot better by default without needing to be updated by the developer. Also, any game updates are rumored to be encouraged by Nintendo themselves as new releases.
Reuters, in its turn, reports that Switch 2 will have an exclusive custom chip from NVIDIA and will be released this year.
We will find out if this is true in March this year, after the end of the fiscal year for Nintendo. After all, the president Shuntaro Furukawa had previously stated that he did not plan to produce any equipment during the next fiscal year.