Virtual machines are never a security boundary. If you configure them correctly, avoid all the footguns, and pray that there's no VM escape vulnerabilities that affect "correctly" configured VMs then they can be a crude approximation of a security boundary that may be enough for your use case, but they aren't a suitable substitute for entirely separate hardware.

Its all turtles, all the way down.

Yeah, in some (rare) situations physical isolation is a more appropriate level of security. Or if you want to land somewhere in between, you can use VM's with single tenant NUMA nodes.

But for a typical case, VM's are the bare minimum to say you have a _secure_ isolation boundary because the attack surface is way smaller.