If I understand correctly, a big problem is that the calculation isn't embarrasingly parallel: the various chunks are not independent, so you need to do a lot of IO to get the results from step N from your neighbours to calculate step N+1.

Using more smaller nodes means your cross-node IO is going to explode. You might save money on your compute hardware, but I wouldn't be surprised if you'd end up with an even greater cost increase on the network hardware side.