Do you mean Xbox Game Pass Ultimate? It can be streamed out of a browser or mobile app.
Why would they need a hardware device when your probably holding a device that supports cloud streaming and they can milk you for a subscription fee?

With the Switch 2 probably releasing next year, the handheld market is already pretty crowded as it is. What would differentiate Microsoft’s offering from the rest? They didn’t bother even when the market was just DS/PSP.

This is the best summary I could come up with:

AMD has been quietly arming an entire new wave of Steam Deck competitors, and that got me thinking: where’s Microsoft’s Xbox handheld?

Microsoft has developed a lightweight version of the Xbox user interface that can run on handheld devices, dedicated cloud consoles, and TVs.

The device, codenamed Project Keystone, was then spotted on Xbox chief Phil Spencer’s shelf in October, confirming that the company had manufactured some units.

That’s likely all because regulators around the world have been focused on Microsoft’s cloud gaming efforts as part of a review of its proposed Activision Blizzard deal.

Microsoft’s desktop-focused operating system doesn’t scale down well to smaller devices, especially when a touchscreen or analog sticks are involved.

Valve put a lot of effort into the underlying SteamOS that powers the Steam Deck so that you don’t have to navigate around a desktop Linux environment to get to your favorite games.

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