Exactly same issue here. Not only does it affect Ad Hoc distribution, but for normal App Store distribution, it also receives errors.
"ITMS-90562: Invalid Bundle - One or more dynamic libraries that are referenced by your app are not present in dylib search path." (this is incorrect error message).
Unchecking "Include Bitcode for iOS content" can workaround the problem, but this cannot be applied to apps with Apple Watch applications.
Detailed error log:
ipatool failed with an exception: #<CmdSpec::NonZeroExitException: $ /Applications/Xcode.app/Contents/Developer/usr/bin/python3 /Applications/Xcode.app/Contents/Developer/usr/bin/bitcode-build-tool -v -t /Applications/Xcode.app/Contents/Developer/Toolchains/XcodeDefault.xctoolchain/usr/bin --sdk /Applications/Xcode.app/Contents/Developer/Platforms/WatchOS.platform/Developer/SDKs/WatchOS8.5.sdk -o /var/folders/lv/58r5dhv52j779_qn41gnq4c80000gn/T/ipatool20220310-49488-1r6fqqy/thinned-out/armv7k/Payload/MyApp.app/Watch/WatchApp.app/Frameworks/libswift_Concurrency.dylib --generate-dsym /var/folders/lv/58r5dhv52j779_qn41gnq4c80000gn/T/ipatool20220310-49488-1r6fqqy/thinned-out/armv7k/Payload/MyApp.app/Watch/WatchApp.app/Frameworks/libswift_Concurrency.dylib.dSYM --strip-swift-symbols /var/folders/lv/58r5dhv52j779_qn41gnq4c80000gn/T/ipatool20220310-49488-1r6fqqy/thinned-in/armv7k/Payload/MyApp.app/Watch/WatchApp.app/Frameworks/libswift_Concurrency.dylib
Status: pid 49600 exit 1
Stdout:
SDK path: /Applications/Xcode.app/Contents/Developer/Platforms/WatchOS.platform/Developer/SDKs/WatchOS8.5.sdk
SDK version: 8.5
PATH: ['/Applications/Xcode.app/Contents/Developer/Toolchains/XcodeDefault.xctoolchain/usr/bin', '/Applications/Xcode.app/Contents/Developer/usr/bin']
Using: /Applications/Xcode.app/Contents/Developer/Toolchains/XcodeDefault.xctoolchain/usr/bin/lipo
MachoInfo: cd /
['/Applications/Xcode.app/Contents/Developer/Toolchains/XcodeDefault.xctoolchain/usr/bin/lipo', '-info', '/var/folders/lv/58r5dhv52j779_qn41gnq4c80000gn/T/ipatool20220310-49488-1r6fqqy/thinned-in/armv7k/Payload/MyApp.app/Watch/WatchApp.app/Frameworks/libswift_Concurrency.dylib']
-= Output =-
Non-fat file: /var/folders/lv/58r5dhv52j779_qn41gnq4c80000gn/T/ipatool20220310-49488-1r6fqqy/thinned-in/armv7k/Payload/MyApp.app/Watch/WatchApp.app/Frameworks/libswift_Concurrency.dylib is architecture: armv7k
Exited with 0
Command took 0 seconds
Using: /Applications/Xcode.app/Contents/Developer/Toolchains/XcodeDefault.xctoolchain/usr/bin/dwarfdump
GetUUID: cd /
['/Applications/Xcode.app/Contents/Developer/Toolchains/XcodeDefault.xctoolchain/usr/bin/dwarfdump', '-u', '/var/folders/lv/58r5dhv52j779_qn41gnq4c80000gn/T/ipatool20220310-49488-1r6fqqy/thinned-in/armv7k/Payload/MyApp.app/Watch/WatchApp.app/Frameworks/libswift_Concurrency.dylib']
-= Output =-
UUID: 3285553C-DF9E-38CB-84BA-C5E9E898FFDF (armv7k) /var/folders/lv/58r5dhv52j779_qn41gnq4c80000gn/T/ipatool20220310-49488-1r6fqqy/thinned-in/armv7k/Payload/MyApp.app/Watch/WatchApp.app/Frameworks/libswift_Concurrency.dylib
Exited with 0
...
Command took 0 seconds
Found framework/dylib: /Applications/Xcode.app/Contents/Developer/Platforms/WatchOS.platform/Developer/SDKs/WatchOS8.5.sdk/usr/lib/libobjc.A.tbd
Found framework/dylib: /Applications/Xcode.app/Contents/Developer/Platforms/WatchOS.platform/Developer/SDKs/WatchOS8.5.sdk/usr/lib/libc++.1.tbd
Found framework/dylib: /Applications/Xcode.app/Contents/Developer/Platforms/WatchOS.platform/Developer/SDKs/WatchOS8.5.sdk/usr/lib/libSystem.B.tbd
Found framework/dylib: /Applications/Xcode.app/Contents/Developer/Platforms/WatchOS.platform/Developer/SDKs/WatchOS8.5.sdk/System/Library/Frameworks/CoreFoundation.framework/CoreFoundation.tbd
Search Path: /Applications/Xcode.app/Contents/Developer/Toolchains/XcodeDefault.xctoolchain/usr/lib/clang/13.1.6/lib/darwin, /Applications/Xcode.app/Contents/Developer/Toolchains/XcodeDefault.xctoolchain/usr/lib/swift/watchos, /Applications/Xcode.app/Contents/Developer/Platforms/WatchOS.platform/Developer/SDKs/WatchOS8.5.sdk/usr/lib, /Applications/Xcode.app/Contents/Developer/Platforms/WatchOS.platform/Developer/SDKs/WatchOS8.5.sdk/System/Library/Frameworks
libswiftCore.tbd not found in dylib search path
Stderr:
>
/Applications/Xcode.app/Contents/Developer/usr/bin/ipatool:372:in `run'
/Applications/Xcode.app/Contents/Developer/usr/bin/ipatool:2889:in `block in CompileOrStripBitcodeInBundle'
/Applications/Xcode.app/Contents/Developer/usr/bin/ipatool:2828:in `each'
/Applications/Xcode.app/Contents/Developer/usr/bin/ipatool:2828:in `CompileOrStripBitcodeInBundle'
/Applications/Xcode.app/Contents/Developer/usr/bin/ipatool:2813:in `block in CompileOrStripBitcodeInBundle'
/Applications/Xcode.app/Contents/Developer/usr/bin/ipatool:2812:in `each'
/Applications/Xcode.app/Contents/Developer/usr/bin/ipatool:2812:in `CompileOrStripBitcodeInBundle'
/Applications/Xcode.app/Contents/Developer/usr/bin/ipatool:3115:in `block in ProcessIPA'
/Applications/Xcode.app/Contents/Developer/usr/bin/ipatool:3076:in `each'
/Applications/Xcode.app/Contents/Developer/usr/bin/ipatool:3076:in `ProcessIPA'
/Applications/Xcode.app/Contents/Developer/usr/bin/ipatool:4038:in `<main>'