Our customer has the same problem. It appears since 4 p.m. 12th January 2021 German time. We did not change anything in the system since ~ 12 months. Here a excerpt of the source code:
var itemCreateInfo = new SP.ListItemCreationInformation();
This could be the document set content type is removed from your library, please check if the document set content type is under the content types in library settings.
If it is there, you could try to use the ContentTypeID for document set: var docSetContentTypeID = '0x0120D520';
I reproduce your issue on my tenant. You could check my answer here: ...