That rating means it will handle UP TO 40 HP.
I have the Woodland Mills WC-68, a 6 inch chipper, on a little LX2610SU, 19HP at the PTO. The WC-68 is rated 40 HP too, but if you'll look at the specs, you'll find it doesn't really say what a minimum HP is. The WC-68 doesn't miss a beat, and it takes at least a 5" chunk to bother that LX. You'll be fine with a 4", but I'd encourage something much larger with that L, if not the largest one you can find for a 3 point hitch. It's the mass/speed of the flywheel that counts most. Higher speed units (usually belt drive) typically have two knives, and lower speed (usually direct drive) typically have 4 knives. This pretty well keeps the number of cuts per minute about the same because the high speed units normally run about 1000 RPM, and low speed ones are rated for 540 RPM. Higher speed units typically have a lighter flywheel because higher speed and lower mass can produce as much cutting energy as a lower speed and higher mass. If you want 5 only ways to do something, just ask 5 engineers, but it's pretty simple math, really. A larger opening will let you handle crazier brush than the 4" without having to trim and cut to straighten it up so much. If you get something that small, you're going to have to do a lot more 'prep' work to be able to feed the brush into that chipper, especially anything over about 1 inch in diameter. ABOVE ALL, get one with hydraulic infeed. I have a little 3" Briggs powered chipper/shredder, and plenty experience of how much that thing will hurt you with all the vibration transmitted through the material. You will do a lot of nerve damage in your hands and wrists with a manually fed chipper.
You'll typically run out of chipper long before you run out of tractor. Most of all, BE SAFE and read about all the hazards you're buying into. Chippers are VERY dangerous beasts.
