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Apple says it’s aware of the resolution issue with Ultrawide Displays on M1 Macs
The company is “aware of this issue.”

Several Apple M1 Mac users using ultrawide and super-ultrawide external displays have continuously reported the resolution problems.
Addressing the problem, Apple released a new support document where it acknowledges the resolution problem and says the company is “aware of this issue.” However, Apple hasn’t confirmed when the problem will be fixed, saying “resolution is planned for a future macOS update.”
Apple seeded the first beta of macOS 11.2 last week, so let’s hope the issue will be resolved sooner with the release of macOS 11.2 to the public.