Isn't the problem then that each host would be underutilized on average by a lot? It has X cpus and the service can never use more than X cpus. If a service has

Isn't the problem then that each host would be underutilized on average by a lot? It has X cpus and the service can never use more than X cpus. If a service has any spiky loads then it'd been overprovisioned cpu to handle them at good latency. That seems significantly more expensive at scale.