Some more examples of what I was thinking...

Lighter rather than darker tile will help keep the room balanced with the dark floor and white kitchen. I prefer stacked stone over tile, but the variations in depth of stone pieces means dust may collect on the forward-most stones, and may require extra cleaning, especially if the stacked stone goes to the ceiling.

The TV niche will stay, it allows me to place things like like a soundbar under the TV as well as negate some of the heat from the fire when pushed back.

When you say lighter are you referring more to a medium gray or something even lighter like my wall color or even white? Do you prefer porcelain tile over leaving it as is?

What are your thoughts on white ship lap even?

I know this post is from almost a year ago, but what did you end up doing?

I'm having the same exact design dilemma! Torn between stacked stone, slab porcelain and shiplap. I originally wanted the slab porcelain, but am a bit put off by the logistics (for a 13' fireplace).

What you do with the fireplace wall will be permanent. The gray fad will fade, so I would avoid using gray tile or stone. The flooring is a more permanent feature, too, and I would, personally, choose a multi-light-brown stacked- stone finish for the fireplace, including the niche (if you don’t close it up). If you keep the niche, consider putting a piece of art there rather than a tv.
Art would hang better on a painted surface, and you could paint the back of the niche to match the stone color. The tv would be better placed on a console.