This is debated. Some people say that AWS will never touch AGPL software which accomplishes the goal of not getting AWSed while remaining OSI certified.

AWS specifically might not, but I can say with some certainty that cloud providers can host AGPL software. It's not impossible that Compose (the now IBM-owned cloud database hosting company) pulled in more revenue from RethinkDB than RethinkDB, Inc., did.

Yeah, it's a matter of risk. Rightly or wrongly you could get hit with a lawsuit that says "we have infected your entire control plane; open-source it or die" and every cloud provider has to weigh that for themselves.

To be fair, thigh, when the cloud provider has deeper pockets than the developer of the AGPL'd software, that means something different.

It's not only about money though, it's also about megacorps extending the code but keeping that code to themselves, not contributing back.

AGPL does help with this. An early example was when Google's search interface answered unit conversion queries using GNU Units. They fixed a bug internally and didn't flow the bug back upstream. Since they weren't distributing Units, but were only executing it as a service, their behavior was strictly conforming to the letter of the GPL. The failure to respect the spirit of the GPL was a factor in AGPL's development.

AGPL code is strictly forbidden for use inside the company now, partially because they consider private modifications to open-source software to be a competitive advantage.

Can AWS abide by the rules of AGPL though? If they don't opensource their modifications and their whole AWS system?