A glob expanded to more filenames than the shell can pass in one command
The shell expands *.fastq.gz into every matching filename before the program starts, and there is a hard OS limit on the total size of that argument list. It fails at a certain number of files, which is why the same command worked on a smaller dataset.
Feed the files instead of listing them: find . -name '*.fastq.gz' | xargs -n 100 …, or pass a file-of-filenames if the tool supports one. Many bioinformatics tools accept a list file precisely because of this limit.