As I understand it, I should be allowed 8 virtual processors per core, and 4 per VM.
How do I find out why I'm being limited to two, and how to overcome that?
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The Intel Xeon X5150 is a dual-core CPU that was used in systems from mid-2006 until 2007.
It ran in systems that could accommodate two CPU sockets, so at most, you can have four usable cores if both sockets are populated. If only one CPU socket is populated, you won't be able to create a virtual machine with more than two cores.
In a VMWare, Hyper-V or similar virtualization scenario, that means that you won't be able to take advantage of the higher advertised CPU core limits.
I'm guessing your system only has one physical CPU.