For those running into this issue, I’ve narrowed down the reason it’s happening. It does have to do with missing dependencies in Visual Studio.
If you didn’t install any workloads, PowerShell Tools will install the .NET Desktop Development workload while attempting to install the extension. The problem is that this only installs a partial portion of the workload for some reason.
You’ll need to ensure that the following optional features are also installed after install PowerShell Tools. I’m sure not all of these are required but this works when installing on my machine.
The goal with the next version of the extension is to fix this issue so that, even if you just install the PoshTools extension, VS will also install the proper prereqs features.