Steps to Reproduce:
Does this issue occur when all extensions are disabled?: Yes/No
I can't capture the screenshot with Windows 10 function, the picture is excluded the cursor image. So there's no image to show you what happen.
I am running in the same issue (screenshot below)

VS Code version: 1.26.1
OS: Manjaro Linux (kernel 4.18.3)
Issue also occur with extensions disabled.
This happens when you _alt_+tab out of the window, the alt state isn't evaluated again when focus returns to the window.
@Tyriar : This is happening for me normally
+1
Fixed by xtermjs/xterm.js#1636
Most helpful comment
Fixed by xtermjs/xterm.js#1636