This is not the ordinary simulation argument, or even closely related to it. The proposition that you reject, that our universe is simulable in its entirety, is one of the premises of that argument.

I for one strongly predict that our future ancestors will never create a galaxy or multiple galaxies of virtual humans from their own past. It's ethically dubious, and far, far from being one of the most useful things they could do with that computing power if they simply want to determine the likely outcome of various contact scenarios or the what hypothetical aliens would be like. By the time we're capable of it, it simply wouldn't have much to recommend it as an idea.