There's plenty of "relatively compact" ARM-based handhelds targeting the retro market already, but many of them are shipping with a pitiful amount of RAM (1GB or so) making them an absolute non-starter, while others (selling for significantly higher prices) run crappy Android-based OS's that will never be updated. There is a gap in the market for a good-quality retro-like handheld shipping with a Linux-native OS (or even just enabling one to be installed trivially after-the-fact, with everything working and no reliance on downstream hacked-together support packages).

Well, apparently there's this project I learned about literally yesterday! https://portmaster.games/games.html

There are handhelds for less than 200$ with very good screens and controls that can play all of these. Not to mention stream (via Steam or other software) from your PC!

APUs have the GPU and CPU on the same package, or sometimes even the same die (with tiling). If there was to be an Nvidia GPU and AMD CPU type system, they would have to be separate packages.

Sure, but Apple isn't selling their silicon to anyone else and Valve, successful as they are, don't have Apples money and economy-of-scale to throw at designing their own state-of-the-art CPU/GPU cores and building them on TSMCs state-of-the-art processes. Valve will have to roll with whatever is available on the open market, and if that happens to suck compared to Apples stuff then tough shit.