Anecdotically, I had the case on VMWare 4 (that was in 2012 or 2013) that a Solaris 11 VM managed to reboot the entire ESX it was hosted on. Very weird bug where ESX passed through some interrupt or something.

But in this case I think they mean on the same machine. "In production" would be more accurate than "in a cloud environment". And yeah I wouldn't load custom kernel modules in production just to do observability.

Cloud goes beyond rented VMs. Fully managed cloud services have thousands or millions of production customers on the same node. They have to be very careful about what they run as root.