This option is designed to add a virtual hard disk to a VM. A new host NVMe drive is a physical disk, not a virtual disk.
To make use of your physical NVMe disk using Fusion, you will need to create a new virtual disk and store that virtual disk onto your NVMe drive. This is not the same as having the disk's contents directly on the physical NVMe disk – Fusion is not able to do that. If you create a new virtual hard disk, you will end up with a virtual disk file (".vmdk") (or a set of virtual disk files) stored on your host NVMe disk, and the contents of those virtual disk files will represent what the virtual machine "sees" as its hard disk drive contents. More information is in the documentation: Managing Virtual Hard Disks