I'm torn between wanting Xbox series S performance in a handheld (possible with 720p target resolution and process node improvements like 3 nanometer lithography). This hypothetical device would be very similar to the Lenovo legion or ROG Ally in size and weight, but run the optimized Xbox operating system.
I already have a switch and steam deck though so I'm not sure that I'd really want a third portable, unless maybe it dual booted into Windows or had some special feature.
The alternative would be an Xbox phone. The trouble with gaming phones has always been the mobile games themselves and the touch controls. The Nintendo switch solved both problems in a phone-like form factor, but the available apps are paltry and there's no 4G/5G. The hypothetical Xbox phone would have to make the same compromises as switch ports do, but would be fully capable for backwards compatibility (one and 360) and would be an ideal platform for XCloud anywhere. Although Microsoft might be scaling back their cloud ambitions since Stadia died and Amazon Luna is languishing in relative obscurity. Also if it is an Xbox first and phone second, it might eventually succeed where windows phone failed.