When extraordinary is no longer enough

Nvidia’s Q1 results published yesterday evening were extraordinary. Revenue grew 85% year-on-year to more than $81 billion, data center revenues surged 92%, and gross margins remained around 75%. Very few companies in market history have managed to combine this level of growth with such profitability and pricing power at this scale.

And yet the stock initially fell after the results because markets had expected even more. That says a great deal about the current phase of the cycle. As George Soros and Robert Shiller argued for years, markets are driven as much by narratives as by fundamentals. Today, the dominant narrative remains artificial intelligence and the massive infrastructure race behind it. Nvidia has effectively become the central supplier of this global digital arms race.

The numbers continue to suggest that the AI CAPEX cycle is not slowing down. Hyperscalers are still accelerating investments into computing power and data centers, while Nvidia announced an additional $80 billion share buyback program, one of the largest capital return commitments in corporate history.

At the same time, moments like these naturally raise questions about market psychology and exuberance. But for now, the key missing ingredient for a major market downturn remains a significant tightening shock from interest rates. While bond yields have been moving higher, earnings momentum linked to AI remains powerful enough for equity markets to absorb it. Nvidia still trades at around 23 times forward earnings — a demanding valuation, but not yet at levels historically associated with extreme market peaks.

At ECP, we continue to believe that equities remain the unavoidable long-term engine of wealth creation, while also recognizing that diversification and valuation discipline matter more than ever in markets increasingly driven by a small number of dominant winners.