Optional prop with default may incorrectly be undefined in template when `exactOptionalPropertyTypes` and `strictNullChecks` are true

[Dylancyclone]

Vue version

v3.5.13

Link to minimal reproduction

https://play.vuejs.org/#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

Steps to reproduce

1. In your tsconfig.json, under compilerOptions, enable exactOptionalPropertyTypes and strictNullChecks
   • Note: Setting "strict": true will also enable strictNullChecks and cause the issue
2. In a component, create an optional prop that has a default value
   Example:

const props = withDefaults(
	defineProps<{
		stringWithDefault?: string
	}>(),
	{
		stringWithDefault: "defaultValue",
	}
)

3. Pass that variable to another component as a prop that is required (line 17 in the reproduction)
4. Notice the error:

Type 'string | undefined' is not assignable to type 'string'.
  Type 'undefined' is not assignable to type 'string'.ts(2322)

...even though it is impossible for the variable to ever be undefined.

5. To confirm, pass the variable as props.stringWithDefault instead of stringWithDefault and notice the error goes away
   • stringWithDefault is (incorrectly) string | undefined while props.stringWithDefault is (correctly) string

What is expected?

When passing the prop in the template, it should never be undefined since there is a default value set. The expected behavior is seen when prepending the variable with props. to use the variable through the props object

What is actually happening?

The variable is possibly undefined even though there is a default value, causing a typescript error when passing it to a prop that is required

System Info

System:
    OS: Linux 6.13 Ubuntu 24.04.2 LTS 24.04.2 LTS (Noble Numbat)
    CPU: (8) x64 Intel(R) Core(TM) i7-8665U CPU @ 1.90GHz
    Memory: 4.61 GB / 15.27 GB
    Container: Yes
    Shell: 5.2.21 - /usr/bin/bash
  Binaries:
    Node: 22.14.0 - ~/.nvm/versions/node/v22.14.0/bin/node
    Yarn: 1.22.21 - ~/.nvm/versions/node/v22.14.0/bin/yarn
    npm: 10.9.2 - ~/.nvm/versions/node/v22.14.0/bin/npm
  npmPackages:
    vue: ^3.0.0 => 3.5.13

Any additional comments?

In the reproduction link, the only changes made to the tsconfig.json file is setting exactOptionalPropertyTypes and strictNullChecks are true. If either are not present, the issue doesn't happen.

I'm not sure if it's relevant, but if you turn the reproduction back to use typescript version 5.6.3 the issue goes away because all the props are of type any. The issue appears in the following 5.7.0-beta version because the type information suddenly appears. I didn't notice anything relevant in a quick skim of the 5.7 release notes.

Related: vuejs/language-tools#3728

Sort of related to #6532 , but different because that issue is about still allowing undefined as a value, where this issue is that undefined is a possible when when it should be impossible

[Dylancyclone]

After looking into the problem more, I believe this issue belongs in the vuejs/language-core repo, since the generated build is completely valid, the error only happens during type checking. I think I might've narrowed it down to the __VLS_WithDefaults type in language-core/lib/codegen/localTypes.ts

vuejs/language-tools#5338