Same problem. Using XCode 15 with an iPhone SE and a Apple Watch Series 4. Really want to be able to build to the physical Apple Watch, rather than the simulator.

Found a workaround that is working for me (XCode 15, Apple Watch Series 4, Sonoma 14.0 / MacBook Pro 2021). If running on ethernet (I am), then: On your Mac goto System Settings -> (type in) Internet Sharing -> Toggle "Internet Sharing" and generate a wifi network from your Mac. Connect your iPhone and Apple Watch to the created Wifi Network. XCode should now recognize the Apple Watch. Cheers :)