Hello, @Subhankar Banerjee !
There's a lot to unpack here so I'll do my best to address each of your questions and requirements. Since Azure Stack adds another dimension of complexity, you may want to follow up with another post with the Azure Stack tag once you have a better idea of what you want to use in your solution.
What virtual machines support nested virtualization?
Nested virtualization has two components: Supported operating systems and supported hardware/virtual machines.
Operating systems/Configuration:
For supported operating systems and configuration requirements, you'll want to reference the Run Hyper-V in a Virtual Machine with Nested Virtualization documentation:
https://learn.microsoft.com/en-us/virtualization/hyper-v-on-windows/user-guide/nested-virtualization
While going through this, you'll note that only Windows Server and Windows are mentioned. While not officially supported, there are blogs that will walk you through the process of creating a nested virtual machine in Azure with a Linux VM like this blog from brianlinkletter.com:
Hardware:
When looking at hardware requirements, you can find a full list of VMs with hardware that support nested virtualization in the Azure compute unit (ACU) documentation:
https://learn.microsoft.com/en-us/azure/virtual-machines/acu
- D_v3
- Ds_v3
- Dv4
- Dsv4
- Ddv4
- Ddsv4
- E_v3
- Es_v3
- Ev4
- Esv4
- Edv4
- Edsv4
- F2s_v2 - F72s_v2
- FX4 - FX48
- M
Specific VM spec requirements
When looking for a VM with specific requirements, you'll want to browse the virtual machine sizes:
https://learn.microsoft.com/en-us/azure/virtual-machines/sizes
There are many different options that would match the 4 vCPU / 12GB of RAM / 128GB of storage depending on what your needs are. This might be a good opportunity to contact Azure sales to figure out what the most cost efficient configuration is (both from a free credit standpoint and in planning to migrate to a paid subscription later on). A D4ads v5 could work, but there may be a better option for you.
Azure Kubernetes Service (AKS)
Azure has a managed Kubernetes service, Azure Kubernetes Service or AKS which simplifies deploying a managed Kubernetes cluster in Azure. This is worth your time to familiarize yourself with if you are interested in Kubernetes on Azure, especially if you want to use Linux and a free trial subscription:
Azure Stack
Azure Stack is worth having its own discussion, and I would encourage you to reach out to the Azure Stack specialists once you have a better idea of what you want to use in your solution:
https://learn.microsoft.com/en-us/answers/topics/azure-stack.html
I hope this has been helpful!