Technically: the driver detects if it is run in a virtualization environment, it is at least able to detect KVM and VMware. On the upside, it's relatively easy to bypass the check.

Legally: I assume no cloud provider will assume the legal risk of telling their customers "and here you have to break the EULA of the NVIDIA driver in that way to use the service". In Europe where the legal environment is more focused on interoperability, this might not be as much of a problem, but still it may be too much risk.

They disallow such usage for "GeForce" by proprietary driver's EULA, and they limit open source driver performance (IIRC they require signed binary blob).