The SanDisk Ultra Dual Drive USB-C can get warm or even quite hot during sustained use — especially if you're transferring large files or using it continuously for read/write operations. This is generally normal for compact flash storage, particularly those in metal casings, which conduct and hold heat more noticeably. The iPhone 16 Pro Max supports USB 3 speeds over USB-C, and that means higher data rates (and more power draw) during transfers, especially with higher-capacity drives like 128GB or 256GB models.
Regarding your concern about damage: it's very unlikely that the drive could cause any harm to your iPhone or the USB-C port, assuming the drive itself is functioning correctly and isn't defective. iPhones have protection circuits built in to regulate voltage and current over USB-C, and if something abnormal were to happen (like a short or overcurrent), the iPhone would usually cut power to the port or show a warning.