Apple to Fix Resolution Issue With Ultrawide Displays on M1 Macs in Future macOS Update
In a new support document, Apple has acknowledged that when an ultrawide or super-ultrawide external display is connected to a Mac with the M1 chip, some resolutions supported by the display may not be available currently.

Apple says it is aware of this issue and has a solution planned for a future macOS update. Apple did not specify exactly when a fix will be available, but the first beta of macOS 11.2 was seeded last week, so that is one possibility.
To see additional resolutions for your external display, click on the Apple logo in the top-left corner of your Mac, open System Preferences, click Displays, and press and hold the Option key while you click "Scaled."
There is a running thread about this issue in the MacRumors forums.
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Top Rated Comments
No bezel dividing the display down the middle.
Playing games on an ultrawide is pretty awesome.
M1 Macs can only support one external display without DisplayLink work-arounds.
M1 [laptops] don't support dual [external] monitors [without unreliable and expensive dongles/hubs from displaylink].
And when you add another machine with an M2 processor, you can run another display. That’s M2 from Apple.”
People have probably bought more adapters than you can shake a stick at trying to get their displays to work with the new M1s... only to discover, it was the M1 Macs all along that had the issue. Apple told them it was their device or adapter was the problem... or that it was outright unsupported... until that molehill turned into a mountain of complaints and returns.
M1 Macs aren't the shiny wonder kids all the streamers made them out to be. They have issues whether anyone wants to admit it or not. And remember... Apple will be the last to admit anything. And they just admitted they have a problem... a problem any streamer should have caught because every user out there did.