This will materialize in the same way that Cloud gaming has taken the market by storm. It's nice when you want/need to game on a phone, but the experience doesn't hold up to native and the laws of physics are immutable, you can't defeat the latency of running your PC in a data center miles from your house. Even running Office apps will be a notably degraded experience.
Microsoft is crazy, but they've not done anything to kill the golden Windows goose in all this time, I can't see them thinking this would fly when they know the costs and downsides from doing xCloud.