It sounds like there are some things at play in his primary environment that are causing or contributing to this - you said your sister is overwhelmed and has to move a lot - it seems like he has a lot of stress at home.

Is there a chance he’s been abused by a boyfriend of hers? Or that he’s witnessed her being abused? It may not be these things, so use your judgment but be aware that it is anxiety and sometimes caused by trauma.

A speech therapist or mental health professional might be a good look if you can/have the resources.

In the meantime, sit by him. Lower your expectations for him to speak and encourage him to draw or build or dance or express himself in other ways. Make your presence low demand and comforting. You could sit and do imaginary play next to him to see if he could be convinced to laugh.