When creating capacity reservation group, then create a machine with capacityReservationGroupID, but machine will be created in availability set, even location eastus with 3 zones.    

4.18.0-0.nightly-2024-09-10-184137    

Always    

1.Create a Capacity Reservation and 3 capacity reservation group for each zone 1,2,3
2. Create azuremachinetemplate and machineset
$ oc get azuremachinetemplate capi-azure-machine-template1 -o yaml  
apiVersion: infrastructure.cluster.x-k8s.io/v1beta1
kind: AzureMachineTemplate
metadata:
  name: capi-azure-machine-template1
  namespace: openshift-cluster-api
spec:
  template:
    metadata: {}
    spec:
      capacityReservationGroupID: /subscriptions/53b8f551-f0fc-4bea-8cba-6d1fefd54c8a/resourceGroups/ZHSUN-AZ11-LKCH7-RG/providers/Microsoft.Compute/capacityReservationGroups/zhsun-capacity
      identity: None
      image:
        id: /subscriptions/53b8f551-f0fc-4bea-8cba-6d1fefd54c8a/resourceGroups/zhsun-az11-lkch7-rg/providers/Microsoft.Compute/galleries/gallery_zhsun_az11_lkch7/images/zhsun-az11-lkch7-gen2/versions/latest
      networkInterfaces:
      - acceleratedNetworking: true
        privateIPConfigs: 1
        subnetName: zhsun-az11-lkch7-worker-subnet
      osDisk:
        cachingType: None
        diskSizeGB: 128
        managedDisk:
          storageAccountType: Standard_LRS
        osType: Linux
      sshPublicKey: 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
      vmSize: Standard_D4s_v3 
3.
    

Machine failed to create.
$ oc get machine capi-ms1-gmzcs -o yaml   
apiVersion: cluster.x-k8s.io/v1beta1
kind: Machine
metadata:
  creationTimestamp: "2024-09-11T07:26:11Z"
  finalizers:
  - machine.cluster.x-k8s.io
  generation: 1
  labels:
    cluster.x-k8s.io/cluster-name: zhsun-az11-lkch7
    cluster.x-k8s.io/set-name: capi-ms1
    disk: ultrassd
    machine.openshift.io/cluster-api-cluster: zhsun-az11-lkch7
  name: capi-ms1-gmzcs
  namespace: openshift-cluster-api
  ownerReferences:
  - apiVersion: cluster.x-k8s.io/v1beta1
    blockOwnerDeletion: true
    controller: true
    kind: MachineSet
    name: capi-ms1
    uid: 0573f04f-e663-41a6-aa94-b9f140f13ed8
  resourceVersion: "177984"
  uid: 2d9586a2-7e93-4622-8951-34fce7a882fc
spec:
  bootstrap:
    dataSecretName: worker-user-data
  clusterName: zhsun-az11-lkch7
  infrastructureRef:
    apiVersion: infrastructure.cluster.x-k8s.io/v1beta1
    kind: AzureMachine
    name: capi-ms1-gmzcs
    namespace: openshift-cluster-api
    uid: 9f361480-0952-4daa-86d1-a5a3e45490a2
  nodeDeletionTimeout: 10s
status:
  conditions:
  - lastTransitionTime: "2024-09-11T07:26:35Z"
    message: 0 of 2 completed
    reason: Failed
    severity: Error
    status: "False"
    type: Ready
  - lastTransitionTime: "2024-09-11T07:26:47Z"
    message: |
      virtualmachine failed to create or update. err: failed to create or update resource zhsun-az11-lkch7-rg/capi-ms1-gmzcs (service: virtualmachine): PUT https://management.azure.com/subscriptions/53b8f551-f0fc-4bea-8cba-6d1fefd54c8a/resourceGroups/zhsun-az11-lkch7-rg/providers/Microsoft.Compute/virtualMachines/capi-ms1-gmzcs
      --------------------------------------------------------------------------------
      RESPONSE 409: 409 Conflict
      ERROR CODE: OperationNotAllowed
      --------------------------------------------------------------------------------
      {
        "error": {
          "code": "OperationNotAllowed",
          "message": " Associating with Capacity Reservation Group '/subscriptions/53b8f551-f0fc-4bea-8cba-6d1fefd54c8a/resourceGroups/ZHSUN-AZ11-LKCH7-RG/providers/Microsoft.Compute/capacityReservationGroups/zhsun-capacity' is not supported for VM 'capi-ms1-gmzcs' in an availability set."
        }
      }
      --------------------------------------------------------------------------------
    reason: Failed
    severity: Error
    status: "False"
    type: InfrastructureReady
  - lastTransitionTime: "2024-09-11T07:26:11Z"
    reason: WaitingForNodeRef
    severity: Info
    status: "False"
    type: NodeHealthy
  lastUpdated: "2024-09-11T07:26:11Z"
  observedGeneration: 1
  phase: Pending

E0911 07:26:43.133292       1 controller.go:329] "Reconciler error" err=<
    failed to reconcile AzureMachine: failed to reconcile AzureMachine service virtualmachine: failed to create or update resource zhsun-az11-lkch7-rg/capi-ms1-gmzcs (service: virtualmachine): PUT https://management.azure.com/subscriptions/53b8f551-f0fc-4bea-8cba-6d1fefd54c8a/resourceGroups/zhsun-az11-lkch7-rg/providers/Microsoft.Compute/virtualMachines/capi-ms1-gmzcs
    --------------------------------------------------------------------------------
    RESPONSE 409: 409 Conflict
    ERROR CODE: OperationNotAllowed
    --------------------------------------------------------------------------------
    {
      "error": {
        "code": "OperationNotAllowed",
        "message": " Associating with Capacity Reservation Group '/subscriptions/53b8f551-f0fc-4bea-8cba-6d1fefd54c8a/resourceGroups/ZHSUN-AZ11-LKCH7-RG/providers/Microsoft.Compute/capacityReservationGroups/zhsun-capacity' is not supported for VM 'capi-ms1-gmzcs' in an availability set."
      }
    }
    --------------------------------------------------------------------------------

$ oc get machines.machine.openshift.io -n openshift-machine-api    
NAME                                    PHASE     TYPE              REGION   ZONE   AGE
zhsun-az11-lkch7-master-0               Running   Standard_D8s_v3   eastus   2      5h56m
zhsun-az11-lkch7-master-1               Running   Standard_D8s_v3   eastus   3      5h56m
zhsun-az11-lkch7-master-2               Running   Standard_D8s_v3   eastus   1      5h56m
zhsun-az11-lkch7-worker-eastus1-qzgfk   Running   Standard_D4s_v3   eastus   1      5h48m
zhsun-az11-lkch7-worker-eastus2-ntbx2   Running   Standard_D4s_v3   eastus   2      5h48m
zhsun-az11-lkch7-worker-eastus3-j7r5f   Running   Standard_D4s_v3   eastus   3      5h48m    

Machine can be created successful and associated with the capacity reservation group.