They don’t dull as much as they mushroom out. ELI5: the tip of the tungsten penetrator is getting squished between the armor and the body of the penetrator. DU has different material properties that cause it to shed/flake apart from the outside in rather than the whole tip squishing. Basically, it’s more brittle and it shatters in a way that doesn’t impact performance as much as a softer metal deforming. It seems counterintuitive that a shattering projectile can be a better one, but it’s useful to realize that this happens on a very short time scale: it only needs to hold together long enough to get through the armor.
There are other reasons DU is used. It’s better at starting fires than tungsten rounds, and DU a waste product while tungsten is a rare metal.
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