There seems to be bug (at least in macOS Sequoia) where you can't unhide a file if it is inside of a hidden folder in iCloud Drive:

So, assuming you have /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory/SomeFile.txt:

You can do:

chflags hidden /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory
chflags hidden /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory/SomeFile.txt

And the folder AND file will be hidden. BUT if you then try to unhide just the file:

chflags nohidden /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory/SomeFile.txt

It just doesn't work, even if you restart Finder or the whole device, the file stays hidden.

For some reason, you have to unhide the folder and file:

chflags nohidden /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory
chflags nohidden /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory/SomeFile.txt

Wait a couple of seconds (presumably for the change to be synced?), and then you can hide just the folder:

chflags hidden /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory

There seems to be a bug or undocumented behavior (at least in macOS Sequoia) where you can't unhide a file if it is inside of a hidden folder in iCloud Drive (this does not happen outside of iCloud Drive):

So, assuming you have /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory/SomeFile.txt:

You can do:

chflags hidden /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory
chflags hidden /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory/SomeFile.txt

And the folder AND file will be hidden. BUT if you then try to unhide just the file:

chflags nohidden /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory/SomeFile.txt

It just doesn't work, even if you restart Finder or the whole device, the file stays hidden.

For some reason, you have to unhide the folder and file:

chflags nohidden /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory
chflags nohidden /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory/SomeFile.txt

Wait a couple of seconds (presumably for the change to be synced?), and then you can hide just the folder:

chflags hidden /Users/John/Library/Mobile\ Documents/com~apple~CloudDocs/SomeDirectory