Actually I just found out that GCE itself imposes a 1000-instance limit:
https://cloud.google.com/compute/docs/instance-groups/creating-groups-of-managed-instances

The following revision refers to this bug:
  https://chromium.googlesource.com/external/github.com/luci/luci-py.git/+/4ac1c3735889aa3e743cf2d9ad23f65998a87f73

commit 4ac1c3735889aa3e743cf2d9ad23f65998a87f73
Author: smut <smut@google.com>
Date: Thu Feb 16 23:05:02 2017

Enforce limits on configs

10 for instance templates (arbitrarily chosen based on current usage) and 1000 for instances per instance group (GCE-enforced limit).

BUG= 692425 , 692428 

Review-Url: https://codereview.chromium.org/2698153002

[modify] https://crrev.com/4ac1c3735889aa3e743cf2d9ad23f65998a87f73/appengine/gce-backend/config.py
[modify] https://crrev.com/4ac1c3735889aa3e743cf2d9ad23f65998a87f73/appengine/gce-backend/config_test.py