That readout is not terribly useful, but it is based onSpotlight so if you're seeing something odd like that, you may need to rebuild the Spotlight index.
Rebuild the Spotlight index on your Mac - Apple Support
If that doesn’t work, Copy/Paste this into Terminal. sudo will ask for your password. Just type the password and hit return. It won't show anything on screen. Those two commands essentially nuke all the Spotlight records then force a reindex. You may need to restart or log out/in after running the commands.
sudo mdutil -X /; sudo mdutil -i on /
Spotlight re-indexes your Mac after a macOS update, and this process can take some time.
About Spotlight indexing and search results on Apple devices - Apple Support
You should aim to have 15-20% of your total internal storage as free space (~30-40 GB as an absolute minimum). If you do not have enough free space on your Mac’s internal storage, then here are some steps to take to safely free up space:
Free up storage space on Mac - Apple Support
Optimize storage space on your Mac - Apple Support
How to free up ‘System Data’ and other st… - Apple Community
"System Data" comprises your data, but they are typically hidden files that Spotlight cannot assign to a specific category like Documents or Applications. Examples include Outlook attachments, iOS updates, Cloud storage caches, etc. Starting with macOS 27 Golden Gate, System Data also includes what macOS used to call ‘purgeable’ storage – system caches, Time Machine snapshots and some other data, though the user had no control over the purging. Trying to manually clean out hidden files in System Data is likely to cause more problems than it solves, macOS hides those files for a good reason. Follow the steps in the linked articles above.
On macOS 27, separate ‘purgeable’ space is no longer reported, and instead those data are now considered as used space. They are also now included in System Data, accounting for the apparent increase you (and others) have noticed. You didn't lose space, macOS just categorizes things differently now than on Tahoe.

More detail on this change in this User Tip:
System Data and Free Space Changes in Gol… - Apple Community
The best advice is to just ignore the System Data category. ‘System Data’ is merely a catch-all category for files that Spotlight cannot assign to specific categories like Applications, Documents, Photos, etc. In fact, what is now shown as System Data used to be reported as ‘Other’, Apple changed the label in macOS 12 Monterey. System Data probably sounds better, but Other was closer to reality.