My answer would have been more along the lines of:
Well if you are seeing cpu latency and you are actively blocking out 10ghz to vm2 (making it unavailable to any other vm), and increasing the share value to vm2. Then when vm1 makes a request for cpu resources there is a higher chance that it is going to get denied and you end up with cpu latency as a result (more or less dependent on the load or requests from vm2 and vm1, basically more so when both are above 50% vcpu usage). So basically you should have purchased a server with more available cores...Or, you need to drop the reservation and equalize the share value (or potentially just equalize the share value). Or simply drop the number of cores being handed to the VMs such that they can split up the physical CPUs equally rather then thrashing over some of them.
I would think dropping from 14 to 10* cores would fix it as well...but that's a little bit of a close shave if the vm1 needs a lot of processing power. It just kinda depends on how much the latency is causing additional higher looking cpu usage right?
Would any of you have further thoughts given my answer(s)?