VSCode Vue/Volar intellisense stops working when pressing reference in Nuxt 3 project

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IntelliSense for Vue components stops working in VSCode after I click on a reference (such as a prop of a component). Until then it works, and I can se the details of the Component with IntelliSense. After I click on a reference, for example a prop, the components becomes unknown and the green color disappears.

This is happening in a Typescript Nuxt 3 project (Vue 3) with the plugins "TypeScript Vue Plugin (Volar)" and "Vue Language Features (Volar)". I am running VSCode with WSL (Ubuntu) for the project.

I have tried reinstalling the plugins, disabling all other plugins, and this issue happens on multiple computeres. The IntelliSense works like normal for new Nuxt 3 projects.

Any ideas to why this is happening and how I can fix it?

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