Won't the supply-side incentives misalign with demand-side's desires in this case?

If you choose a specific company's free tier, you can rely on reputation and switch if they misbehave (e.g. they exfiltrate your secrets, log all your activities, build a profile on your workload behavior, etc). But if you don't know where your workload being deployed, the operator has less incentive to treat your compute with respect.

Means this is really only useful for nearly-public workloads, where tampering is not a critical failure mode.