Weekly Investment Update (11/21/2025)

Our next Weekly Investment Update will be published on December 5. We wish you and your families a warm and joyful Thanksgiving.

Markets remained under pressure for the second consecutive week, as continued volatility across large-cap tech weighed on the major indices. While price action has been choppy, we view the weakness as a temporary sentiment shift rather than a reflection of deteriorating fundamentals. In fact, several important catalysts this week reinforced our constructive view on the economy and the AI investment cycle.

Most notably, Nvidia's earnings helped reaffirm the strength of demand for data center compute capacity, underscoring the ongoing momentum in AI-related capital spending. Separately, Alphabet’s launch of Gemini 3.0, though less widely covered, was another significant development. The new model's benchmark performance far exceeded expectations, effectively pushing back against the narrative that LLM scaling has hit a wall — an idea that gained traction post-GPT-5. We have increased exposure to Google as this thesis plays out.

Meanwhile, a series of upbeat earnings results from consumer-facing companies such as Walmart and Gap supported our view that the U.S. consumer remains resilient. This was reinforced by a solid labor market report, which showed job creation outpacing forecasts. Together, these developments suggest that economic fundamentals remain stable even as index-level weakness persists. It is also worth noting that market breadth is improving: The equal-weighted S&P 500 has outperformed the cap-weighted index by nearly 3% this month, a sign that performance is broadening beyond just the mega-cap names.

Nvidia Reports Strong Earnings and Continued Record Demand for Its Semiconductors

What is happening: Nvidia reported record quarterly earnings, with revenue rising 62% year-over-year to $57 billion for the three months ending in October, exceeding consensus estimates of $55 billion. Net income grew 65% to $31.9 billion. Data center sales, largely driven by AI chip demand, totaled $51 billion, also ahead of forecasts. Chief Executive Jensen Huang pushed back against concerns of an AI-driven bubble, stating, “From our vantage point we see something very different,” referring to the expectation of continued strong demand for Nvidia’s chips from the major cloud providers. Importantly, Nvidia guided to $65 billion in revenue for the fourth quarter, approximately $3 billion above expectations, and has reportedly secured $500 billion in sales commitments through 2026.

Despite Nvidia’s strong results, its shares fell 8% from their intraday high on Thursday, reflecting growing investor caution regarding the pace and durability of AI-related capital investment. A key concern is whether demand for AI chips can remain strong enough to justify the level of future committed spending. Since September, the so-called hyperscalers have issued $81 billion in debt to fund AI data center expansion. While this represents a relatively modest shift in funding strategy given the scale of these companies’ balance sheets, the increasing reliance on debt, if sustained, could heighten market concerns about capital discipline and the long-term return on these investments.

Why it matters: Nvidia is the bellwether of the AI investment boom. With a $4.4 trillion market capitalization, Nvidia is the largest company in the world and by itself larger than the entire Japanese or U.K. stock markets. For a business with close to $200 billion of annual revenue to be able to grow revenues by over 60% is unprecedented, and it illustrates the competitive position the company holds. Nvidia currently enjoys an estimated 90% share of the AI semiconductor market coupled with gross profit margins of 73%. In practical terms, the company is expected to capture roughly two-thirds of the cost of every data center buildout focused on AI workloads, highlighting its pricing power and strategic centrality.

Despite its dominance, Nvidia now trades at a forward price-to-earnings ratio of 24x, just above the broader market multiple, suggesting that some of the risks may already be reflected in its valuation. At Bessemer, we hold an overweight position in Nvidia relative to the benchmark though we continue to monitor indicators for a potential inflection in the AI investment cycle. For now, we see no signs of a slowdown at Nvidia itself, though early warning signals may emerge first through its major customers.

Mixed Labor Market Signals Complicate the Fed’s December Interest Rate Decision

What is happening: After being delayed due to the federal government shutdown, the September jobs report came in significantly above expectations, with nonfarm payrolls rising by 119,000 in the month, well above the consensus of 53,000. Despite the strong headline figure, job growth was primarily driven by gains in the healthcare and hospitality sectors, and the prior reports for July and August were revised down by a cumulative 33,000 jobs. That said, the initial survey response rate for September was notably high at 80%, the highest rate since 2019 and likely due to the publication delay, which allowed additional time for data collection. The unusually elevated response rate reduces the likelihood of significant revisions to September data.

While job growth was stronger than expected, the unemployment rate continued to edge higher, rising to 4.4% in September from 4.3% in August. The dichotomy between stronger job creation and a higher number of unemployed workers can partly be explained by an increase in the labor force participation rate, which rose to a four-month high in September, a positive sign that more people are entering or rejoining the workforce. At the same time, the number of permanent job losers, or those whose employment ended involuntarily and who began looking for work, climbed to the highest level in four years. Overall, the uptick in the unemployment rate reflects a combination of both supply and demand dynamics, with greater workforce participation alongside a moderation in labor demand.

Why it matters: Beneath the strong headline report, data still suggest that the labor market is continuing gradually to soften but is not facing a severe slowdown. Although job gains were concentrated and labor demand is moderating, the unemployment rate remains well below its historical average with little evidence of broad-based deterioration. With the October nonfarm payrolls report officially cancelled, the November report is scheduled to be released on December 16, falling after the Federal Reserve’s next monetary policy decision on December 10. Similarly, the November consumer price index, or inflation, report will be released on December 18, creating less visibility into both sides of the Fed’s dual mandate ahead of its interest rate policy decision.

This dynamic presents a difficult backdrop for the Federal Reserve. Markets are currently pricing in a 68% chance of a 25-basis-point rate cut in December, but odds fell to as low as 29% during the week. While it remains unclear whether the Fed will cut rates in December due to limited incoming data, we anticipate additional easing in the year ahead as signs of labor market softness become more apparent, prompting the Fed to continue toward a more neutral policy stance.