So, stripped of marketing hype, what Microsoft is offering with Windows Subsystem for Linux 2 (WSLS) is using Hyper-V as a bare metal (type 1) hypervisor running both Windows 10 and a bare Linux kernel as clients. Then various Linux distributions (distros) are loaded on top of the bare Linux kernel in a Docker-like way.
So, it looks like it would be possible for some competitors to offer a similar setup using a different type 1 hypervisor (since we already pay a “Windows tax” there is not additional cost for Windows on a Windows laptop) and their are open-source type 1 hypervisors including KVM and Xen.
I did some research about the cloud; although Microsoft Azure uses a variant of Hyper-V; Amazon Web Services (AWS) used Linux Xen and has converted to Linux KVM; while Google Cloud Platform (GCP) uses Linux KVM.
So, the likely competitors to Microsoft’s WSL2 are either existing VM vendors (IBM/Red Hat Enterprise or Dell/VMWare) or a combination of a CPU manufacturer and a large Cloud provider (Intel/AWS or Intel/Google).
Intel/AWS is interesting because AWS is the largest cloud vendor; Intel/Google is interesting because of its Chrome operating system (who knows what lurks in Chrome? and Google has laptop hardware experience).
I would suspect that some Google employees already run Linux KVM on their laptops and could tweak it to emulate the advantageous parts of WSL2 because Google employees have both the itch/need and the skillset to scratch the itch. I once worked at Chase Econometrics / Interactive Data Corporation (CE/IDC) and know that time sharing (ancestor of cloud) company employees often had configurations and projects out in front of official company offerings.
The incentive for Google is similar to the reasons they developed Android and Chrome; Google wants some control over the gateway to their online services.
Both Amazon and Google would want their cloud developer clients to have an easy way to test configurations on their laptop before loading to the cloud and I think they would be concerned that WSL2 is primed for users to move to Microsoft Azure rather than their offerings.
So, back to Intel. Intel is developing products to work with Microsoft Azure, but they probably are not leaving their other cloud data center customers (Amazon and Google) behind; instead Intel probably has some unannounced KVM projects developed in cooperation with their lead customers (or at least like Google they probably have some clever engineers running KVM as a type 1 hypervisor on their laptops --it is what clever engineers do – they come up with new and novel configurations using either cutting edge tech or older tech in very novel ways).