I don't see their comment as paranoid because cloud providers generally aee incompetent/steal your data, but because other cloud providers are direct competitors.
Even if they're not sifting through your server data, they can possibly try to get a competitive advantage by analyzing things like usage data as someone above pointed out.
When AT&T was forced by law to allow MCI switching equipment in their facilities, they tended to leave that room's window open, so pigeons could nest in the equipment.
(I might have a detail wrong, this and a hundred other great telecom anecdotes are in The Master Switch.)
Always nice to make sure no parties you depend on have conflicting interests.
Even if they're not sifting through your server data, they can possibly try to get a competitive advantage by analyzing things like usage data as someone above pointed out.