I changed the app clip to not use the redirect and just be direct and the issue still happens. I am able to consistently recreate the issue by resetting my iPhone and scanning the QR code. Which first time does not register and opens safari instead. The second time registers. Is this just a bug in iOS?

Same issue here. Regenerated package.resolved, updated package versions, reset cache, reset schemes, added another dependency still having this issue. Don't have this issue with another application using Xcode Cloud.