So, if you provision an x1.32xlarge with 128 vCPU and 1.92TB of RAM, you get a single, dedicated host with that much CPU and memory. Nobody else gets it - it's dedicated to you 100%.
The profit AWS is making is purely due to datacenter efficiency and being able to automate their operations at scale.
That's what they want you to think, but a lot of it comes in the form of ripping you off for bandwidth to actually get data out of EC2.
What is a vCPU?
As soon as 32GB DIMMs drop enough in price, I would expect them to do exactly that. You can configure a Dell R930 with e7 Haswell CPUs online, if you want to double-check it. Not sure if the R930 can go to 8 CPUs (which the e7 Haswells CPUs support).
Charge more than what it costs you. That's how to make money.
if anything its a diversion from fixing what is broke or even admitting to it within some organizations
The 50%+ profit margins have to be coming from somewhere. AWS is not made of magic, it's made from largely the same PC parts you buy on newegg