This page discusses the subject of "user data" and includes the following:
Although you can only access instance metadata and user data from within the instance itself, the data is not protected by cryptographic methods. Anyone who can access the instance can view its metadata. Therefore, you should take suitable precautions to protect sensitive data (such as long-lived encryption keys). You should not store sensitive data, such as passwords, as user data.
This seems clear enough. The "user-data" bundle is something that you send to the cloud provider so that it can be sent to new EC2 instances. The cloud provider will not show that data to other people, but it will not be especially careful about it. It is obvious that some sort of storage is implied, and Amazon states quite plainly that it does not apply the kind of storage method that is deemed "appropriate" for sensitive data, such as private keys.