Ok,
at lvl1 definition Openstack came up with it's cpu modelling which in this case 
is actually:
  cpu mode='host-passthrough
  + a bunch of required features
That is what gives your LVL1 the invpcid feature (so far so good).

At lvl2 we have
Nova:
  <cpu mode='host-model' check='partial'>
    <model fallback='allow'/>
    <topology sockets='1' cores='1' threads='1'/>
  </cpu>
vs uvtool
 <!-- has no definition, keeping defaults -->

Thanks for the data Nicolas!
With that in mind I have set my LVL1 to run the same host-passthrough config 
that you have reported.
Then again I configure LVL2 to run the same host-model config.
Note: "my 16.04" would not allow "check='partial'", so I dropped it.
What version of libvirt is running in your lvl1 (or all levels)?
Current is 1.3.1-1ubuntu10.24

I was feeling glad that it seems that the uvtool style guests work for you as I 
assumed.
But even with the same CPU definitions used in my case it works for me.
That is for "16.04 > 16.04 > 16.04" as well.

x86 nested virt is never really supported, just "as good as it happens to 
work". I wonder if that is one of those cases.
My chip is a somewhat older 12 core "Intel(R) Xeon(R) CPU E5-2620 v3 @ 2.40GHz".

We have plenty of SW workarounds already, but if you can spend the time I 
wonder if you can:
- reproduce the same on a different host CPU
- To confirm our current theory that the usage/emulation/nesting of invpcid is 
the root cause, could you on the failing case in the definition for LVL2 add 
<feature policy='disable' name='invpcid'/> to the cpu section. That would keep 
the rest as-is, but remove that feature.


NB-reply: there was no --os-variant 18.04 released back then, but since there 
was no change since former releases it doesn't matter - the only drawback is 
that sometimes people are wondering if it is missing.

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https://bugs.launchpad.net/bugs/1797332

Title:
  qemu nested virtualization is not working with Ubuntu16.04 + Intel CPU

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