External display turns off when in clamshell mode on MacBook Air M1

Hello! I have two MacBook Air M1's and a Gigabyte G27QC 2K monitor. Both of my M1 Macs have the same issue: the external monitor goes to sleep/standby when the lid is closed. Everything works just fine if the lid is open (verified that devices do not go to sleep).

I also have an Intel MacBook Pro (2017) that works fine with the lid closed.

It seems like the issue exists only on M1 Macs.

I've tried multiple USB-C adapters and there is almost no difference (tried about 7 most popular USB-C hubs on Amazon)

The interesting thing is that with one particular adapter I had a lot more success. CableCreation 7-in-1 USB-C Hub was working flawlessly for 3 months with my M1 Macs fine even with the lid closed but today it started doing the same thing.

Does anyone know about issues with M1 macs and external monitors? It seems like Macs enter some type of "mode" when the lid is closed and they require a different type of HDCP handshake than normal or something.