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Its always good practice to set CPU limits across VMs. When CPU resources are overcommitted, the host time-slices the physical processors across all virtual machines, so each virtual machine runs as if it has its specified number of virtual processors. When host runs multiple virtual machines, it allocates to each virtual machine a share of the physical resources.
There are two things here:-
1) When all VMs are running and contending for the CPU cycles then in that case cpu cycles will be divided as per the share across all the VMs.
2) When one VM is running and rest are idle(not active) then in that case active VM can grab whatever CPU cycles it requests.