Putting it more clearly: Most services development is done in languages that have their own virtual machine (JS/TS, Go, JVM, Python, .NET). In what world does it make sense to run that VM inside another VM?
Finally, I think the experiences over the last 20 years around .NET and the JVM should have shown there is in fact not really such a thing as a truly universal abstract VM. A well-written VM tends to be written towards supporting the language(s) it is built for.
... Not unless you're willing to throw away almost all added value, and then you start looking like WASM. And then what's your value beyond native code, running on the hypervisor and/or in a container?
(There are in fact proposals for adding GC hooks in WASM. I'd have to spend some time reading up on them to evaluate whether they address my objections.)
I mostly agree with your overall point though. I’m not making the point that WASM right now (or even later) is the future of deploying backend services, however it is somewhat of a universal VM. If it’s a useful one is yet to be seen.