This is solved now.

By going into this directory, mentioned in the log:
root: 
/Users/YOUR_USER_NAME/.local/share/sfdx/node_modules/@salesforce/lwc-dev-server

I then deleted the node_modules folder and reinstalled the dependencies using:
```
npm install --save-dev
```

[I referenced this issue on GitHub][1]


  [1]: https://github.com/forcedotcom/lwc-dev-server-feedback/issues/98