I can confirm that bug https://bugs.launchpad.net/ubuntu/+source/cloud-
init/+bug/1811446 has been fixed in Cloud-Init version
18.5-21-g8ee294d5-0ubuntu1~16.04.1 on Bionic and Xenial:

Bionic:

root@cloud-init-bug:~# lsb_release -a
No LSB modules are available.
Distributor ID: Ubuntu
Description:    Ubuntu 18.04.1 LTS
Release:        18.04
Codename:       bionic

root@cloud-init-bug:~# cloud-init --version
/usr/bin/cloud-init 18.5-21-g8ee294d5-0ubuntu1~18.04.1

root@cloud-init-bug:~# grep 'hashed' /var/log/cloud-init.log 
2019-02-13 16:58:33,387 - cc_set_passwords.py[DEBUG]: Setting hashed password 
for ['root']:

root@cloud-init-bug:~# cat /etc/shadow | grep root
root:$2y$10$dNEtJjlezvPjRbbJMZ5c1.L9dQ6TvyF8RnEbh42E9MkQwrLlXgsmG:17940:0:99999:7:::

Xenial:
root@cloud-init-bug:~# lsb_release -a
No LSB modules are available.
Distributor ID: Ubuntu
Description:    Ubuntu 16.04.5 LTS
Release:        16.04
Codename:       xenial

root@cloud-init-bug:~# cloud-init --version
/usr/bin/cloud-init 18.5-21-g8ee294d5-0ubuntu1~16.04.1

root@cloud-init-bug:~# grep 'hashed' /var/log/cloud-init.log 
2019-02-13 17:03:28,248 - cc_set_passwords.py[DEBUG]: Setting hashed password 
for ['root']:

root@cloud-init-bug:~# cat /etc/shadow | grep root
root:$2y$10$E9SZmg3AYO87cBvecAmDOuMB..QF8H6zSxvKTT384OrdaLqae8GHu:17940:0:99999:7:::

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https://bugs.launchpad.net/bugs/1813346

Title:
  sru cloud-init (18.4.0 update to 18.5-21-g8ee294d5) Xenial, Bionic,
  Cosmic

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