I'm seeing the same a lot today, on about 75 percent of builds.

Update: The issue was temporarily resolved by an Apple-side modification, then began to recur on November 1, three months after the previous occurrence.

I was experiencing the same symptoms as the OP on Wednesday, both in Xcode 16.4 and 26.0 – a message "Simulator was shutdown during an update." As I prepared to gather diagnostics, previews started working again spontaneously. One weird thing I noticed while it was failing. As I watched '~/Library/Developer/Xcode/UserData/Previews/Simulator%20Devices/' in Finder, a folder (with a UUID-shaped name) would appear for just a second or two, then disappear. Then another folder with a different UUID would appear and disappear. None of the UUIDs ever matched an installed simulator. Now that it's functioning normally, the folders in Simulator%20Devices stick around.

OP, you wouldn't happen to be running Visual Studio Code with the Swift and/or Flutter extensions, would you?