Webpack compilation error when using NextJS with cypress

[joniaiuser]

Error: Webpack Compilation Error
./components/ToastNotification.tsx 53:15
Module parse failed: Unexpected token (53:15)
File was processed with these loaders:
 * ../../Library/Caches/Cypress/8.3.1/Cypress.app/Contents/Resources/app/packages/server/node_modules/ts-loader/index.js
You may need an additional loader to handle the result of these loaders.
|     }, [show]);
|     if (!show || !animation)
>         return <></>;
|     switch (toastNotificationType) {
|         case ToastNotificationType.Success:

Any ideas what is causing this? Tried to fix by changing tsconfig file but not sure what changes to make.