Photoshop does not save .NEF format any more?

"Camera Raw 2022 saves a modified RAW in .NEF format with an accompanying .XMP file."

If you are not using Save command but rather OK to confirm changes original format will remain the same and additional file with adjustments will be created.

In case you want to Save or Export file from ACR then you must use some of the offered formats, NEF is not an option. NEF was never option as far as I can remember.

ACR and LR treat all proprietary raws as read-only. They cannot and have never saved out an NEF or any proprietary raws. The XMP is what is saved and defines the parametric edits you made.

Your description is somewhat confusing, but as far as I can tell, what you describe sounds normal.

NEF is a proprietary raw file format from Nikon. It can only be generated in a Nikon camera.

Raw files can not be modified by Camera Raw (ACR). It saves all edits to that NEF as text instructions in an xmp "sidecar" file associated with the original NEF.

When that raw file is opened into Photoshop from ACR, Photoshop can only save it out as a rendered RGB file, separate from the raw file, as a PSD, TIFF, jpeg, PNG etc.