When there are no available IP addresses in the IP pool, the VM will not start. The error message in the virt launcher pod is not clear.

v4.17

Define a NAD with IPAM defining a small range, and exhaust the pool.

1. Create a namespace:
oc new-project localnet-ipam

2. Create a NAD with a small IP range:
cat << EOF | oc create -f -                                                 
apiVersion: k8s.cni.cncf.io/v1
kind: NetworkAttachmentDefinition
metadata:
  name: ipam-localnet-nad
spec:
  config: |2
    {
            "cniVersion": "0.4.0",
            "name": "tenantblue-network",
            "type": "ovn-k8s-cni-overlay",
            "topology":"localnet",
            "subnets": "192.168.10.0/30",
            "excludeSubnets": "192.168.10.1/32",
            "allowPersistentIPs": true,
            "netAttachDefName": "localnet-ipam/ipam-localnet-nad"
    }
EOF

3. Create a VM (it will get the only IP available in the pool):
cat << EOF | oc create -f -  
apiVersion: kubevirt.io/v1
kind: VirtualMachine
metadata:
  creationTimestamp: null
  labels:
    kubevirt.io/vm: vma-localnet-ipam
  name: vma-localnet-ipam
spec:
  running: true
  template:
    metadata:
      creationTimestamp: null
      labels:
        kubevirt.io/domain: vma-localnet-ipam
        kubevirt.io/vm: vma-localnet-ipam
    spec:
      domain:
        devices:
          disks:
          - disk:
              bus: virtio
            name: containerdisk
          - disk:
              bus: virtio
            name: cloudinitdisk
          interfaces:
          - masquerade: {}
            name: default
          - bridge: {}
            name: ipam-network
          rng: {}
        machine:
          type: ''
        resources:
          requests:
            memory: 1024Mi
      networks:
      - name: default
        pod: {}
      - multus:
          networkName: localnet-ipam/ipam-localnet-nad
        name: ipam-network
      volumes:
      - containerDisk:
          image: quay.io/openshift-cnv/qe-cnv-tests-fedora:39
        name: containerdisk
      - cloudInitNoCloud:
          userData: |-
            #cloud-config
            user: fedora
            password: password
            chpasswd: { expire: False }
        name: cloudinitdisk
EOF
4. Create another VM:
cat << EOF | oc create -f -  
apiVersion: kubevirt.io/v1
kind: VirtualMachine
metadata:
  creationTimestamp: null
  labels:
    kubevirt.io/vm: vmb-localnet-ipam
  name: vmb-localnet-ipam
spec:
  running: true
  template:
    metadata:
      creationTimestamp: null
      labels:
        kubevirt.io/domain: vmb-localnet-ipam
        kubevirt.io/vm: vmb-localnet-ipam
    spec:
      domain:
        devices:
          disks:
          - disk:
              bus: virtio
            name: containerdisk
          - disk:
              bus: virtio
            name: cloudinitdisk
          interfaces:
          - masquerade: {}
            name: default
          - bridge: {}
            name: ipam-network
          rng: {}
        machine:
          type: ''
        resources:
          requests:
            memory: 1024Mi
      networks:
      - name: default
        pod: {}
      - multus:
          networkName: localnet-ipam/ipam-localnet-nad
        name: ipam-network
      volumes:
      - containerDisk:
          image: quay.io/openshift-cnv/qe-cnv-tests-fedora:39
        name: containerdisk
      - cloudInitNoCloud:
          userData: |-
            #cloud-config
            user: fedora
            password: password
            chpasswd: { expire: False }
        name: cloudinitdisk
EOF

The event section of the virt launcher pod for the second VM (vmb):
Events:
  Type     Reason                  Age   From               Message
  ----     ------                  ----  ----               -------
  Normal   Scheduled               5m9s  default-scheduler  Successfully assigned localnet-ipam/virt-launcher-vmb-localnet-ipam-zxgxv to net-awax-417-jsfcg-worker-0-skwx2
  Warning  FailedCreatePodSandBox  3m8s  kubelet            Failed to create pod sandbox: rpc error: code = Unknown desc = failed to create pod network sandbox k8s_virt-launcher-vmb-localnet-ipam-zxgxv_localnet-ipam_95789cf1-02a7-46e4-a1c0-3bb96d491a93_0(860a275ec4ad7fc653d516f0765ecf7f2e601153da638b350902054915a05dc6): error adding pod localnet-ipam_virt-launcher-vmb-localnet-ipam-zxgxv to CNI network "multus-cni-network": plugin type="multus-shim" name="multus-cni-network" failed (add): CmdAdd (shim): CNI request failed with status 400: 'ContainerID:"860a275ec4ad7fc653d516f0765ecf7f2e601153da638b350902054915a05dc6" Netns:"/var/run/netns/c61361b7-fae9-4369-8ad8-81cf42226a13" IfName:"eth0" Args:"IgnoreUnknown=1;K8S_POD_NAMESPACE=localnet-ipam;K8S_POD_NAME=virt-launcher-vmb-localnet-ipam-zxgxv;K8S_POD_INFRA_CONTAINER_ID=860a275ec4ad7fc653d516f0765ecf7f2e601153da638b350902054915a05dc6;K8S_POD_UID=95789cf1-02a7-46e4-a1c0-3bb96d491a93" Path:"" ERRORED: error configuring pod [localnet-ipam/virt-launcher-vmb-localnet-ipam-zxgxv] networking: [localnet-ipam/virt-launcher-vmb-localnet-ipam-zxgxv/95789cf1-02a7-46e4-a1c0-3bb96d491a93:tenantblue-network]: error adding container to network "tenantblue-network": CNI request failed with status 400: '[localnet-ipam/virt-launcher-vmb-localnet-ipam-zxgxv 860a275ec4ad7fc653d516f0765ecf7f2e601153da638b350902054915a05dc6 network tenantblue-network NAD localnet-ipam/ipam-localnet-nad] [localnet-ipam/virt-launcher-vmb-localnet-ipam-zxgxv 860a275ec4ad7fc653d516f0765ecf7f2e601153da638b350902054915a05dc6 network tenantblue-network NAD localnet-ipam/ipam-localnet-nad] failed to get pod annotation: timed out waiting for annotations: context deadline exceeded
'
': StdinData: {"binDir":"/var/lib/cni/bin","clusterNetwork":"/host/run/multus/cni/net.d/10-ovn-kubernetes.conf","cniVersion":"0.3.1","daemonSocketDir":"/run/multus/socket","globalNamespaces":"default,openshift-multus,openshift-sriov-network-operator","logLevel":"verbose","logToStderr":true,"name":"multus-cni-network","namespaceIsolation":true,"type":"multus-shim"}
  Warning  FailedCreatePodSandBox  66s  kubelet  Failed to create pod sandbox: rpc error: code = Unknown desc = failed to create pod network sandbox k8s_virt-launcher-vmb-localnet-ipam-zxgxv_localnet-ipam_95789cf1-02a7-46e4-a1c0-3bb96d491a93_0(91efc314224198eb1dd75689d1a2ab32297df110e97d33437c79bdfbcf37c5ef): error adding pod localnet-ipam_virt-launcher-vmb-localnet-ipam-zxgxv to CNI network "multus-cni-network": plugin type="multus-shim" name="multus-cni-network" failed (add): CmdAdd (shim): CNI request failed with status 400: 'ContainerID:"91efc314224198eb1dd75689d1a2ab32297df110e97d33437c79bdfbcf37c5ef" Netns:"/var/run/netns/c57ded9f-df4d-4c8e-bc7e-0d67096ce5d3" IfName:"eth0" Args:"IgnoreUnknown=1;K8S_POD_NAMESPACE=localnet-ipam;K8S_POD_NAME=virt-launcher-vmb-localnet-ipam-zxgxv;K8S_POD_INFRA_CONTAINER_ID=91efc314224198eb1dd75689d1a2ab32297df110e97d33437c79bdfbcf37c5ef;K8S_POD_UID=95789cf1-02a7-46e4-a1c0-3bb96d491a93" Path:"" ERRORED: error configuring pod [localnet-ipam/virt-launcher-vmb-localnet-ipam-zxgxv] networking: [localnet-ipam/virt-launcher-vmb-localnet-ipam-zxgxv/95789cf1-02a7-46e4-a1c0-3bb96d491a93:tenantblue-network]: error adding container to network "tenantblue-network": CNI request failed with status 400: '[localnet-ipam/virt-launcher-vmb-localnet-ipam-zxgxv 91efc314224198eb1dd75689d1a2ab32297df110e97d33437c79bdfbcf37c5ef network tenantblue-network NAD localnet-ipam/ipam-localnet-nad] [localnet-ipam/virt-launcher-vmb-localnet-ipam-zxgxv 91efc314224198eb1dd75689d1a2ab32297df110e97d33437c79bdfbcf37c5ef network tenantblue-network NAD localnet-ipam/ipam-localnet-nad] failed to get pod annotation: timed out waiting for annotations: context deadline exceeded
'
': StdinData: {"binDir":"/var/lib/cni/bin","clusterNetwork":"/host/run/multus/cni/net.d/10-ovn-kubernetes.conf","cniVersion":"0.3.1","daemonSocketDir":"/run/multus/socket","globalNamespaces":"default,openshift-multus,openshift-sriov-network-operator","logLevel":"verbose","logToStderr":true,"name":"multus-cni-network","namespaceIsolation":true,"type":"multus-shim"}
  Normal  AddedInterface  65s (x3 over 5m9s)  multus  Add eth0 [10.129.2.50/23] from ovn-kubernetes

Error message indicating the lack of available IP in the pool as the cause for the failure.