The last 5-10 years or so tree specialists have been urging folks to do it this way, on a nearby stake, rather than around the trunk. New trees will not survive without supplemental water. Getting someone to water or even fill a bag regularly is challenging. So, water gators are a huge boon!

BUT "anything that covers the trunks of young trees and reduces air flow and light exposure will, over time, create a dark, moist, and reduced oxygen environment that’s damaging to the bark of young trees. Wet, damaged bark allows opportunistic pests and pathogens to invade." The danger isn't a presumption that it is always filled to the top with water, but that the gators prevent light [edited to correct typo], oxygen, and the low humidity environment the bark of young trees needs.

https://gardenprofessors.com/irrigation-bags-the-good-rarely-the-bad-frequently-and-the-ugly-all-of-them/