Trouble running `netlify serve` in nuxt project

I have a Nuxt project successfully deployed to Netlify. Locally when I try to run the netlify serve command locally I get an error

◈ Function server has returned an error: Cannot find module '[omitted]/.netlify/functions-serve/.unzipped/server/server.js'
Require stack:
- [omitted]/.nvm/versions/node/v18.20.1/lib/node_modules/netlify-cli/node_modules/lambda-local/build/lambdalocal.js

Interestingly, in the generated /.netlify/functions-serve/.unzipped/server/ folder there is a server.mjs file but not (as the error indicates) a server.js file.

I find this very hard to debug. Could this be a config problem on my side?

Is there a particular reason why you’re trying to run netlify serve?

$ netlify help serve
Build the site for production and serve locally. This does not watch the code for changes, so if you need to rebuild your site then you must exit and run `serve` again.

If I understand correctly netlify serve could be a great tool for local testing. For example you can pass

  --country <geoCountry>Two-letter country code (https://ntl.fyi/country-codes) to use as
       mock geolocation (enables --geo=mock automatically)

to test things like country-based redirects

I think this problem is easy to reproduce. I tried it on an almost empty nuxt3 project and see this same problem there