Microsoft is working on an artificial intelligence (AI) chip for its next generation HoloLens headset.

And the U.S. technology giant could take it to other products in its hardware range, Panos Panay, corporate vice president of devices at Microsoft, told CNBC on Tuesday.

In July, Microsoft disclosed it was working on a processor for the second generation of HoloLens, a headset that allows users to interact and touch digital images overlaid on the real world. Microsoft calls this "mixed reality." The AI chip will allow HoloLens to do things like recognize objects in the line of sight.

It marks Microsoft's first foray into AI chips, as it looks to take on rivals such as Apple and Google.

The software giant is also looking to expand its offering. When asked by CNBC if Microsoft will introduce AI chips across the device range, Panay said "yes".

"We have to continue to find those pieces of silicon, those chipsets that have to be developed to bring sensors to life, to connect people with each other and with their products," Panay told CNBC in a TV interview.

Microsoft now has an array of devices. It has expanded its Surface line of tablets, which was launched in 2012, to include a laptop and desktop. It also has the Xbox gaming console and HoloLens headset.

There's an arms race in AI chips at the moment. Huawei introduced its own AI chip called the Kirin 970 that it put in the Mate 10 smartphone released earlier this year. Apple's new iPhones also have the company's own A11 bionic chip inside.