"Failed to load cloud chats" causes layout shift and accidental chat selection

What version of the IDE extension are you using?

26.825.32147

What subscription do you have?

PRO

Which IDE are you using?

VS Code

What platform is your computer?

Microsoft Windows NT 10.0.22631.0 x64

What issue are you seeing?

When the "Failed to load cloud chats." message appears in the VS Code extension, it causes the recent chats list to shift down by one row.

The problem is that this message usually appears with a delay of about 2–3 seconds after opening the chat list. By that time, I have already located the chat I want to open and am about to click it.

If the error message appears at that exact moment, the entire list shifts down, and my click lands on a different chat.

This has happened to me multiple times and makes the chat list feel unreliable to interact with.

What steps can reproduce the bug?

Open the recent chats list.
Wait for the chat list to appear.
Move the cursor to one of the chats and prepare to click it.
After approximately 2–3 seconds, the "Failed to load cloud chats." message appears.
The chat list shifts down by one row.
The click may land on a different chat than the one originally under the cursor.

What is the expected behavior?

Displaying the cloud chats error should not change the position of already rendered chat items.

For example, the extension could:

reserve space for the cloud status/error message from the beginning;
display the error without affecting the layout;
or show it as a notification/toast instead of inserting a new row above the chat list.

Additional information

Actual behavior

The error message is inserted above the chats after a delay, causing a sudden layout shift and potentially resulting in an unintended chat being opened.

Screenshot: attached screenshot showing the "Failed to load cloud chats." row.

Reproduce the issue in the VS Code extension by opening the recent chats list and waiting for the delayed cloud-chat error. Trace the recent chats UI and the "Failed to load cloud chats." row, then verify that showing the error no longer moves already rendered chat items or changes which chat a click selects.