The actual TPM storage may be tiny, but you can use it to encrypt and decrypt arbitrary amounts of data. All the TPM needs to hold is the key. That you can act

The actual TPM storage may be tiny, but you can use it to encrypt and decrypt arbitrary amounts of data. All the TPM needs to hold is the key. That you can actively ask it to transfer data to the Watch or Cloud doesn't automatically mean that it is not using the TPM for storing that data at rest, requiring the phone to be unlocked for any such transfer.