Designate an external SSD for iCloud sync

I have a 2018 MacBook Pro 15” w/ Touch Bar and 512GB SSD (FR972LL/A, Ventura 13.2.1). I want to keep iCloud data synced and downloaded because certain applications report errors when data are not local. Certain custom configuration and data files are stored in iCloud so the same applications on my Mac mini also have access and I don't want to go through the hassle of manually syncing every time changes are made - that never goes well. I'm concerned about running out of disk space as I store more and more on iCloud.

How can I designate an external drive on my MBP as the iCloud sync destination? I read this isn't supported. Are there any other solutions for this conundrum, perhaps another cloud storage that does support this successfully for macOS?