See working solution here: https://stackoverflow.com/a/72521604/8478420

There is an error in file /Applications/Xcode.app/Contents/Developer/Platforms/WatchOS.platform/Developer/Library/Xcode/PrivatePlugIns/IDEWatchSupportCore.ideplugin/Contents/Resources/IDEWatchSupportCore.xcplugindata You should make its backup, then open it in plist editor and fully remove the following items: Root/plug-in/extensions/Xcode.DebuggerFoundation.AppExtensionHosts.watchOS Root/plug-in/extensions/Xcode.DebuggerFoundation.AppExtensionToBundleIdentifierMap.watchOS