Which tool is used to customize cloud VM installations?

The correct answer is cloud-init. This tool is specifically designed to automate the initial configuration of cloud instances when they are launched. It runs scripts and executes commands on first boot, allowing administrators to customize settings, install packages, or configure network interfaces. Cloud-init is particularly useful with virtual machines hosted in cloud environments, as it can take parameters from the cloud provider and apply them to the instance automatically, streamlining the provisioning process.

The other options, while relevant to automation and configuration management, are not tailored specifically for customizing cloud VM installations during the initial launch phase. Chef and Puppet are primarily focused on configuration management after the system has been provisioned, managing the configurations of running systems over time. Terraform, on the other hand, is an infrastructure as code tool used to provision and manage cloud infrastructure but does not directly customize the operating system or applications within an instance once it is up and running.