Microsoft has transferred its $22 billion Army AR headset project to Anduril.

Microsoft is transferring its $2.2bn US Army augmented reality (AR) headset project to defence technology startup Anduril Industries, which still needs approval from the US Department of Defense. If approved, Anduril will be responsible for production, future software and hardware development, and the delivery schedule.

The deal is significant for Anduril, which is seeking to raise up to $2.5bn at a $28bn valuation and has partnered with OpenAI, while also building a manufacturing plant in Ohio. Anduril founder Palmer Luckey sold his Oculus virtual reality (VR) headset startup to Meta for $2bn.

For Microsoft, it will no longer be at the helm of headset hardware production but will continue to provide cloud and AI support for the project.