As, of now, the docs recommend setting the workspaceFolder config key in your .vscode-test.js/mjs/cjs file.

For example:

// .vscode-test.mjs
import { defineConfig } from "@vscode/test-cli";

export default defineConfig({
  files: "out/test/**/*.test.js",
  workspaceFolder: ".vscode-test-workspace",
});