I've never heard of that before. Besides, dedicated server is an unfortunate term in practice either; I may pay Hetzner for a bunch of dedicated servers, some run a bunch of VMs, some run Kafka without a virtualization layer. My services in containers on Kubernetes in VMs on dedicated servers are still running on dedicated servers, but definitely not what I'd call bare metal. In my experience, calling the Kafka server "bare metal" is understood by everyone, used by pretty much everyone I've come across and doesn't get mixed up with adjacent concepts so easily. Maybe that's different in niche/research circles where "bare machine" is a concept that's actually relevant in day-to-day work, I wouldn't know. As far as I'm aware, the term is very much alive and kicking.

I think you'll find that hardware/embedded development is not a niche industry.

A misnomer repeated a thousand times by a thousand different people becomes a/the new meaning. It's how human languages work and evolve or change over time.

Today when most tech people talk about bare metal they refer to a server that is not virtual.

It is still insignificant compared to the original terminology, which is heavily used in hardware/embedded to distinguish between the use of an OS (embedded RTOS, Linux, etc.) vs. direct programming.