This is a workaround that won't work if you only have one Mac... In my case, I happen to have a Macbook Pro and a mac mini, and the problem did not occur on the Macbook Pro, so I copied watchOS DeviceSupport (latest is Watch6,6 10.2 (21S364)) to the mac mini, and the symptom was fixed. For some reason the download of watchOS DeviceSupport (about 2GB) appears to stop completing.

Still not fix on Xcode14 b6 simulator (20A5339d). Also it's same on iPadOS16.1b1 (20B5027f) real device. So it seems Apple think apps should display vertically before and after UIAlertController. It's weird.