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As an Xbox and Nintendo gamer, I'd prefer MS come to some sort of agreement with Nintendo that the Switch would be the unofficial Y platform, being able to play all MS owned games on the go or upscale on television, with MS receiving larger royalties from Nintendo than the typical 3rd party developer would as compensation for the Switch 2 hardware sales boosts from the MS games.

MS releasing a Y themselves with only their games on it would probably be as niche as the PC handheld are, maybe a bit better, certainly not worth the R&D.

Making Switch 2 the unofficial Y model would increase profits greatly, reduce expenses greatly, and sticks it to Playstation especially as they are gearing up to release a handheld themselves.