yes only c8i, m8i and r8i instance types support it. It is called nested virtualization[1]
[1] https://aws.amazon.com/about-aws/whats-new/2026/02/amazon-ec...
[1] https://aws.amazon.com/about-aws/whats-new/2026/02/amazon-ec...
- Their use of bare metal isn't necessarily the latest gen hardware - AWS Lambda is part of AWS, and obviously has privileged access to supply