Maybe because Windows Defender Advanced Threat Protection is an enormous resource hog that scans every byte of memory and storage accessed by the Hypervisor and performs a quadratic time computation on the data? I am just guessing because my “fastest” Windows laptop CPU money could buy feels like a hot smelting furnace and a sloth at the same time when I use VMWare Workstation. What the &$@* is it scanning the VMWare guests for?
More likely crash looping of so many VMs overloading some system with insufficient back pressure, possibly combined with unfortunate cluster management scheduler behavior at this scale of crash looping (e.g. too eager to retry scheduling instances, maybe even on new hosts which causes more infrastructure load).
VM storage is probably on Windows Server, plus AD. I'd bet out of band management is all in the impact zone too. Might be back to someone pushing physical switches and hooking up a KVM.