Hello 👋,
I use these extensions regularly for Magento 2 developments.
PHP Intelephense by Ben Mewburn
This is used to validate PHP code, jump to reference and many more features.
https://marketplace.visualstudio.com/items?itemName=bmewburn.vscode-intelephense-client
XML by Red Hat
This is used for XML linting in layout, di.xml, etc XML files.
MagentoWizard by Vitaly Peretiatko
This is amazing extension ease to work on Magento 2 and it does create extensions, plugins, etc.
Error Lens by Alexander
This is used to display the code errors inline and it is super helpful.
I will be sharing the VS Code settings that I have configured to work.