How to alter values of form elements based on other values

Got it to work:

/**
 * Implements hook_inline_entity_form_entity_form_alter.
 *
 * @return void
 */
function my_module_inline_entity_form_entity_form_alter(&$entity_form, &$form_state) {
  if ($entity_form['#entity_type'] == 'my_entity_type' && $entity_form['#bundle'] == 'my_entity_bundle') {
    $element_id = join('_', $entity_form['#parents']); // Obtain unique id for the wrapper
    $entity_form['select_a']['widget']['#ajax'] = [
      'callback' => 'my_module_form_select_update_ajax_callback',
      'event' => 'change',
      'wrapper' => $element_id,
    ];
    $entity_form['select_b']['#prefix'] = '<div id="'. $element_id .'">';
    $entity_form['select_b']['#suffix'] = '</div>';
  }
}

/**
 * Ajax callback.
 *
 * @param array $complete_form
 * @param \Drupal\Core\Form\FormStateInterface $form_state
 *
 * @return array
 */
function my_module_form_select_update_ajax_callback(array &$complete_form, \Drupal\Core\Form\FormStateInterface $form_state) {
  $select_a_form_element = $form_state->getTriggeringElement();
  $selected_entity_id = (int) $select_a_form_element['#value'];

  // Find select b in the form.
  $form_part = NestedArray::getValue($complete_form, array_slice($select_a_form_element['#array_parents'], 0, -2));
  $select_b_form_element = $form_part['select_b'];

  // Get options.
  $options = [];
  if ($selected_entity_id>=0) {
    // Add options here based on the entity id.
  }

  // Return new select b.
  $select_b_form_element['widget']['#options'] = $options;
  return $select_b_form_element;
}