I agree that it's too strong, but my take is that the problem is power spikes.
At level 3, it provides a massive spike in power, especially to warlocks and Shadow Magic sorcerers. Why? The combination of its high damage(2d8 for a short sword compared to say 1d12 for a greataxe) and the Advantage it gains against obscured targets, which warlocks(Devil's Sight) and Shadow Magic sorcerers(Eyes of the Dark) are uniquely equipped to take advantage of.
Another issue is that the Resonance Stone and upcasting make it apocalyptically powerful at the end of act 2. Upcasting it to 5th/6th level makes its damage a silly 4d8, and the Resonance Stone further doubles that.
I would solve these issues with a few changes.
1:Make Shadow Blade a 4th or even 5th level spell.
2: Remove benefits from upcasting Shadow Blade, keep its damage fixed.
3: Make it subclass features of Arcane Trickster and Eldritch Knight so they still gain it.
This way, it would be acquired at roughly the same time as the ring and not eclipse everything. Swinging a 2d8 psychic weapon at Advantage and doubling it's damage is still a lot power for little effort.
I see it being added to spell lists and the concentration requirement being removed as Larian wanting it to be used more, but I do think they overcorrected a bit. (I submitted a feedback ticket with all this verbatim already)
