VSCode Version: 1.48.2
OS Version: macOS Catalina 10.15.4 (19E266)
Steps to Reproduce:

xdebug settings:

    {
        "name": "Listen for XDebug",
        "type": "php",
        "request": "launch",
        "port": 9000,
        "xdebugSettings": {
            "max_children": 256,
            "max_data": 512,
            "max_depth": 3
        }

Create a new laravel project using version 5.7.13
Create a new controller php artisan make:controller TestController
Create a public function index() that returns 'hello world'
Create a route that points to this controller in ecompli4/routes/api.php like so:
Route::get('/test', 'TestController@index');
Put a breakpoint in the index function and call with postman. Yellow debug highlighting should appear.
Now create a subdirectory under /app/Http/Controllers called Client.
Move the TestController.php to /app/Http/Controllers/Clients. Update the namespace and use statements like so:
namespace App\Http\Controllers\Client;

use Illuminate\Http\Request;
use App\Http\Requests;
use App\Http\Controllers\Controller;
Update the route to reflect the new namespace like so:
Route::get('/test', 'Client\TestController@index');
Start the debugger and put a breakpoint in the index function.
The breakpoint should catch but without the yellow highlighting.