[BUG] VSCode extension: thinking blocks fail to render until reload

Found 2 possible duplicate issues:

1. https://github.com/anthropics/claude-code/issues/24733
2. https://github.com/anthropics/claude-code/issues/24691

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Found 2 possible duplicate issues: 1. [[BUG] VS Code extension: assistant text and tool outputs disappear during streaming #24733](https://github.com/anthropics/claude-code/issues/24733) 2. [[BUG] Streaming text disappears entirely when followed by tool calls in same response #24691](https://github.com/anthropics/claude-code/issues/24691) This issue will be automatically closed as a duplicate in 3 days. If your issue is a duplicate, please close it and 👍 the existing issue instead To prevent auto-closure, add a comment or 👎 this comment 🤖 Generated with Claude Code

1. Haven't seen assistant text nor tool outputs disappear (...probably?)
2. Does not require a tool call for this to happen

For fun, here's what my Claude suggested I post (they even nicely highlighted it in green in the CLI):

 These are likely related (same v2.1.38 webview rendering pipeline) but distinct symptoms. #24691 and #24733 report permanent
  loss of streamed text/tool output. This issue is specifically about thinking blocks that flash then vanish but persist in state
   (reload restores them). The "reload restores" behavior suggests the rendering pass drops thinking blocks, not the state layer
  — which may help narrow the bug.

Possible remedy, a combination of:

• Closing all Claude Code extensions
• Settings (Feature > Chat > Agent > Thinking)
• Collapsed Tools - off
• Generate Titles - off
• Thinking Style - collapsedPreview
• (the above seem to not matter if you toggle them back after its fixed, so probably not that important)
• Chat > Extension Unification - Disabled (remember to turn inline stuff on again if you want, click copilot icon on lower right)
• Reload after all that

Unknown if because of the closing-everything or the toggling of settings, probably the former.

EDIT: Thinking is still not streaming it seems, just appearing after it's done. Not the same symptom, but unfortunately, this prevents users from being able to interrupt thinking going off the rails :(

In my environment (Cursor), as soon as the Claude Code VSCode Extension automatically updated from 2.1.38 to 2.1.39, the "Thinking" block stopped displaying until the entire thought process was complete.
I was able to fix this by downgrading the Claude Code VSCode Extension to 2.1.38.

Additionally, related to this, there has been an issue since older versions where a collapsed "Thinking process display block" doesn't expand when clicking the very first "Thinking" block in the chat history. Instead, expanding the previous thought block expands the entire set of thought blocks, which is counter-intuitive. Ideally, clicking any "Thinking" block should correctly unfold it.
Personally, I suspect that Anthropic's internal engineers barely use the IDE extension, treating it like a second-class citizen, which makes me very sad. I use this extension quite frequently (especially because the CLI cannot display the thinking process in real-time).

cc @bcherny

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