Azure has recently announced "direct virtualization", which is a sort of logical nesting, in which users can sub-partition their L1 VMs into virtual L2 VMs that are technically siblings.
eventually yes, this is supposed to remove the perf tax of nested virtualization (less world/context switches on vm_exits) and unlocks some new use cases (pass through hardware from your VM to the sibling-guest).
Interesting ! I stopped working in Azure back in August. But I know of teams still using the nested virt HyperV setup I created to allow multicast to between VMs in Cloud.