No such command +nightly-2023-08-25

[pamburus]

Problem

Just created a new empty repository and called cargo init.
Then got this error message in VS Code.

Logs

OS: darwin (23.4.0)
VSCode: 1.89.0-insider
Error message

error: no such command: `+nightly-2023-08-25`

	Cargo does not handle `+toolchain` directives.
	Did you mean to invoke `cargo` through `rustup` instead?

Full log: https://paste.rs/wBhKP

[willcrichton]

How do you have cargo installed?