I've found 3 solutions to the problem.

1. Understanding that it's just a Windows scaling issue, you can set the screen scaling to 100% (not cool on my PC). Go to Display Settings on Windows 10-11 -> Scale and Layout, change 125% to 100%

2. (better way, but not the best way) Go to C:\Users\(yourname)\AppData\Local\Android\Sdk\emulator\qemu\windows-x86_64, then right click on qemu-system-x86_64.exe > Properties > Compatibility > Change high DPI settings check Override high DPI scaling behaviour and set it to System. Apply and reboot Android Studio. Be aware that this solution can cause a blurry screen on the emulated device.

3. (Best way probably) Changing the device to another with a smaller screen/resolution (I've changed from Pixel 8 Pro to Pixel 8a or 9) fixes the problem and it works perfectly!

Credits: https://www.reddit.com/r/AndroidStudio/comments/1efy3i5/comment/mf25drx/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button
https://www.reddit.com/r/AndroidStudio/comments/1efy3i5/comment/mdcd54o/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button