Traffic flow in UCS and Nexus 1k

I am new to UCS and Nexus 1k. I have a question about the traffic flow. Let say i have VM1 and VM2 on the ESXi host running Nexus 1k and they are in the same vlan. If VM1 needs to snd traffic to VM2 then how does this traffic is switched. Does this switch locally by the Nexus 1k or it will go to the Fabric Interconnect and then down to the VM2