I don't think that's actually the case. There were some rumors flying around about this but in their recent event they actually referred to Copilot+ PCs as generally the line targeting more casual users with support for less powerful local inference. And the new devices based on Nvidia RTX Spark (and likely the more powerful solutions from AMD, Intel, Qualcomm with large unified memory) as a "Builder" class targeting developers and heavy local inference users. They also revealed a quantized version of their coding model designed to run on these devices.
So it does seem they may be somewhat working from the bottom up building smaller models or focusing on capable local inference and balancing with more powerful frontier model access.
This is a lot of marketing speak but covers much of what they revealed.
https://blogs.windows.com/windowsexperience/2026/10/07/build... https://github.com/microsoft/windowsML