The fly in the ointment is that a 5k 120Hz monitor would consume Thunderbolt bandwidth to the tune of >42Gbps even just with 8 bit color and >53Gbps with 10 bit color: Neither is possible through a single Thunderbolt 4 connection (40Gbps maximum), so the only way out would be lossy compression (or a dual-cable connection which is practically certainly not what Apple will be going for!) and I'm not sure I'd prefer that over uncompressed 60Hz.
Apple uses DSC on the W5700 cards to connect to the XDR in 6k resolution:
"...
- Three Apple Pro Display XDRs with resolutions of 6016 x 3384 at 60Hz connected to any three of the following locations: Bus 0, Bus 1, and either the top* or rear Thunderbolt 3 ports on your Mac Pro. Connect one display for each location.
..."
Learn about the different display setups you can use with your MPX Module on your Mac Pro (2019).
support.apple.com
Each TB port has a DisplayPort 1.4 stream on it in that 3 monitor set up above. DSC on each.
If uplift to DP v1.4 (HBR3 ) and turn on DSC ( chart normally hidden on link below. click to show compression chart)
Go to the HBR3 column and go down to the 5k 120Hz. It is supported.
en.wikipedia.org
Thunderbolt 4 most certainly supports transport DP v1.4 . Some TBv3 controllers did.
"... The big difference is that Titan Ridge adds support for allowing two DisplayPort 1.4 streams to be encapsulated into the TB3 connection, ... "
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TBv4 is more about not 'under implementing' TBv3 than anything else. ( more minimal standards have to comply with).
( I wouldn't bet on Apple backporting 5K 120Hz support onto an existing AMD GPU or even M1. )
DSC is visually lossless . I suspect there are some "princess and the pea" color correction folks who will only touch completely 4:4:4 video , 10bit color (or better) , and totally uncompressed, but most folks aren't going to be looking for corner cases. DSC goes "up to" 3:1 compression. Only really need here is 2:1 to fit ( 54/2 = 27Gbps )
IMHO, I bigger constraint is more likely to be Apple's display engine where probably won't get more than 2 5k 120Hz going. ( at least on the single die implementations in M1 series generation. )