It's one of two things, either not enough ram, or it's using the vidconsole. To rule them both out, set the ram to at least 5.1gb and set this in the loader:
setenv console vidconsole,comconsole
That setting will avoid the panic, but will make maintenance mode unusable on the vga console. Alternatively, you can add a serial port to the vm and use the comconsole.
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