A BIG part of how he goes so fast is that he gets MUCH more aero/lower than any other sprinter. Watch him and he looks almost like he's descending while sprinting, he's so low on the bike. At those speeds, that's a HUGE difference.

Using Kreuzotter's algorithms, consider the following two scenarios:

(Both on flat ground, 2mph headwind, 15 lb bike, 160 lb rider, 70 inches tall, 1200 watts)

Hands on bar tops yields a speed of 34.5 mph.
Hands on the drops yields a speed of 39.8 mph.

Going that fast, aerodymanics makes a bigger difference than putting out more watts. Just moving your hands to the drops gives a 15.3% improvement. So if Thor, Pettachi and Cavendish all put out the SAME watts, Cavendish will go faster.

And here's the amazing thing, if he instead was as "un-aero" as the other riders but instead put out 15.3% more watts (1383.6 watts in this example), he'd only go 36.7 mph!! (Only a 6.3% gain) That's right, watts have a diminishing return against the wind.