Hello,
Not sure what could be causing this, I'm on o365 provided by my work, and when I create a new folder using the move function it simply puts it on top above all the folders regardless of the name, be it starting with a or z, it shoves it to the top above inbox.
Seems like the best option for the time being would be to manually rearrange them, if you would like to request features to autosort folders to specific criteria the best way would be to send a request through the microsoft feedback hub app.
Hope this helps,
JC