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Ark alone can be over 300GB with its DLC and storage ain't cheap.
Ya, it isnt "recommended" but with a tiny bit of attention it works just fine.
How does the data get from Steam's servers to your processor and graphics card in this scenario?
No, since streaming requires constant internet connection, a steam cloud wouldn't because you'll be accessing the games you own that you bought on your steam account, what you are referring to doesn't involving owning the games being played because you're just owning a license to the games getting streamed. An online storage of the games you own there's no need for constant stream, only internet for installing the games to the storage which then can be played offline on the PC.
Downloading games from the cloud, to your physical storage, still takes the same amount of storage on your device as downloading directly from Steam.
The cloud isn't some magical ethereal storage medium that just has infinite storage...
In this scenario the games you have access to inside the steam cloud will still use your hardware, it's just a method of having games installed outside of the PC within a software instead of a hardware. Basically instead of using a large external drive, you'll be using a steam cloud as storage for all the games you want to have installed on the steam account for playing offline, with the exception you will still need to use a bit of space when the game is played for temporary files which get discarded when the game is closed.
Steam Cloud is just a folder on your computer named userdata that gets backed up by Steam.
The only game I've tested that needs an SSD/NVME is Starfield. Even RUST loads fine due to preloading assets before you play on a server.
6TB drives constantly go on sale for 89-105 depending on the store, which is extremely affordable for the amount of storage. Storage is not as expensive or unaffordable as it used to be, even good SSDs and NVMEs are affordable and tend to go on good sales.
There is a difference because the difference is that you have to download the game to the PC which puts a constant reduction in storage, my method doesn't require you to install any games to the PC, because all the games will be playable through a steam cloud with a single exception which is temporary files in the steam directory if accessing the game in offline mode, between each game getting played the temporary files are replaced with each game getting played.
At which then, you're just streaming.
You...don't know how cloud storage works.