Allocating excessive resources to a virtual machine (VM) can cause resource contention, where multiple VMs compete for the same physical resources, subsequently leading to degraded performance and stability issues in the host and any running VMs. Optimal VM performance is achieved by allocating sufficient resources required for the guest's workload without exceeding the host's capacity. This allows for balanced resource utilization that can accommodate the needs of all VMs and the host system. Overcommitting resources, such as CPU and memory, will lead to the opposite of optimal performance.