It appears to have been fixed in Xcode 15.3 that has been released on March 5th.
From the 15.3 release notes:
Devices
Resolved Issues
Fixed: Running a WatchOS app that requires the companion iOS app to be installed will result in the error “An application bundle was not found at the provided path” when the run destination is set to a Watch via iPhone Simulator pair. (119640671)
Topic:
Developer Tools & Services
SubTopic:
Xcode
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