I personally am scared because the language being used here is not at all specific to the scenario mentioned here ("hosted clients"). I understand that anything more specific would probably be rejected by their legal team. I am afraid that some 5 years down the line they'll be able to do something worse without notifying users because the TOCs and privacy policies are written in this ambiguous language.
Regarding alternatives, I can't really speak on the security/privacy of any of them but from what I can gather, Matrix does have E2E-encryption functionality [2] so I'm not quite sure how it is less secure than Signal (provided you host your own server and/or have a reasonable degree of trust in the server-operator of your conversation-partner).
[0] https://www.cgmagonline.com/2020/08/19/oculus-founder-facebo...
[1] https://www.eurogamer.net/articles/2020-10-15-oculus-quest-2...
[2] https://matrix.org/blog/2020/05/06/cross-signing-and-end-to-...