I imagine a lot of people who use Linux/AWS now started out with bare metal Microsoft/VMWare/Oracle type of environments where AWS services seemed like a massive breath of fresh air.
Having an ability to spin up a server or a vm when you need it without having to ask a single question is very liberating. Sometimes such elasticity is exactly what's needed. OTOH other people's servers aren't always the wise choice, but you have to know both environments to make the right choice, and nowadays I feel most people don't really know anything about bare metal.
Luckily, Amazon is far from the only VM provider out there, so this discussion doesn't need to be polarized between "AWS everything" and "on-premise everything". You can rent VMs elsewhere for a fraction of the cost. There are many places that will rent you bare metal servers by the hour, just as if they were VMs. You can even mix VMs and bare metal servers in the same datacenter.
Look at what Amazon/Google/Microsoft does. If you told me you advocate running your own power plants, I'd eyeroll. But... if you're as large a power consumer as a hyper-scaler, totally different story. Google and Microsoft are investing in lighting up old nuclear plants.
If anything it enables a hybrid environment
Talos OS looks really interesting. But I also need the storage parts, networking parts, etc.
the tooling to manage on prem is truly awful, and attempts to port the nice semantics of cloud have all slowly died (who remembers localstack?)
AWS/Azure/GCP is great, but like any tool or platform you need to do some financial/process engineering to make an optimal choice. For small companies, time to market is often key, hence AWS.
Once you’re a little bigger, you may develop frameworks to operate efficiently. I have apps that I run in a data center because they’d cot 10-20x at a cloud provider. Conversely, I have apps that get more favorable licensing terms in AWS that I run there, even though the compute is slower and less efficient.
You also have people who treat AWS with the old “nobody gets fired for buying IBM” mentality.