[BUG] Severe file picker performance regression (VS Code Extension)

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Starting with v2.1.27 the file picker performance is incredibly slow. It takes anywhere from 5-10s for the first results to show up and another 5-10s before the correct file is displayed.

v2.1.25 is the last version with acceptable performance (though still quite a bit slower than the native one)

Steps to Reproduce

Install Claude Code Extension v2.1.29, start a session and search for files using @

Claude Model

Opus

Is this a regression?

Yes, this worked in a previous version

Last Working Version

2.1.25

Claude Code Version

2.1.29

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

Other

Additional Information

VS Code is up to date (v1.108.2)