Since getting actual Switch game data necessarily involves violating the DMCA, Nintendo's lawyers will have an easy time showing that the only way yuzu can be useful is if the user violates copyright law, thus making the emulator itself illegal.
That is if this even makes it to court.
The Copyright Office has become increasingly friendly to these types of arguments as well, though they have imposed some limitations on games hardware. The next set of rules/guidance they put out won't be until october (They do it every 3 years).
Yuzu isn't sold* as a product and unless Nintendo can convince the court that the mere act of emulation (or obtaining the console keys required to make Yuzu function in the first place) violate their copyright, then I don't see it personally. You can run code that isn't owned by Nintendo on a Switch. Maybe there is a reasonableness argument that people aren't using Yuzu to play Switch homebrew, but there is a homebrew scene around the Switch.
None of that is related to Yuzu though, Yuzu can only play what you give it.
And no I disagree, the fastest way for me to deplop a switch game is to use an emulator such as Yuzu, it's a much faster feedback loop than a devkit and I'm sure there's a lot of indie games developped or tested this way. So there's also other purposes to this software.
But if it's only useful when you illegally infringe copyright, its creators could be found civilly liable for such violation.
I did some looking into this case. Nintendo's lawyers appear to be attempting a novel legal argument: they are composing the DMCA with the doctrine of contributory copyright infringement. Under the latter doctrine, purveyors of a device (or software) can be found liable for copyright infringement even if they didn't commit the infringement themselves, if it can be found that the device is only useful for such infringement. Where the DMCA comes in is, Nintendo is arguing that despite not being a copyright circumvention tool in its own right, Yuzu is only useful for playing games whose DRM has been circumvented; therefore distributing it is an offense of trafficking in circumvention technology under the DMCA. It's not really clear whether the courts will accept this interpretation, but if circumvention is "copyright infringement", then the doctrine of contributory infringement could well apply.
It tends not to matter in courts if using an emulator is better than using a devkit (personally I concede that it may well be, especially early in the development cycle). Because the devkit option is available to you provided you pay for a license, and because not paying for such a license is not a legitimate option for Switch development, the courts are not likely to look at Yuzu as legitimate software for non-infringing Switch development. There was that court case involving illegal DVD decryption where the judge, upon hearing the defendant argue that they just wanted to play DVDs on Linux, stated that that was not a legitimate reason for circumventing DVD encryption because they could have played those DVDs on a Windows machine.