This bug also makes the entire system unresponsive, as it thrashes to disk/swap. My SSD will read/write at 900+ MB/s. This bug will put a ton of wear and tear on our SSDs...

Clearly Xcode devs missed this, since they were working on their pre-release 64GB M1 max machines...

Xcode 13.2 beta (13C5066c) still has this issue!

This issue appears to be fixed for me in 13.2 beta 2 (13C5066c). I did a full clean build (and nuked derived data) and the issue is gone!