Hello Mr ?,
Welcome to Microsoft Q&A forum.
Based on your description, the Steam and Epic version of the game works correctly with PhysX, also other games can works with it. In this case, I believe that there might be an issue with the build of the Xbox app version of the game.
Before we proceed further, can you please monitor it closely in the Xbox app version and tell me if the GPU usage when you get into the area that PhysX should be interfered?
I'm waiting for your reply.