True. I personally prefer non-residential keys that don't take up any space on your yubikey. The keys are reconstructed on the fly based on a value that I receive from the server I am authenticating against.
Passkeys are residential keys and they consume storage. The minor upside is that they free the user from remembering their username.
The other upside is that you can store them in either HSMs or software-backed stores (password managers) or hybrids (like your phone). It's trade-offs all the way down!
