Nvidia (NASDAQ:NVDA) has been on fire this year. Year-to-date, NVDA stock is up 57% to all time highs, mostly because Wall Street thinks that the Covid-19 pandemic will not have a significant or enduring impact on the next-gen GPU maker’s business.

The company’s first quarter 2020 numbers confirmed as much. The semiconductor industry’s brightest star reported 39% sales growth, 680 basis points of gross margin expansion and 106% profit growth. NVDA stock popped on the news.

And this pop makes complete sense.

Although the global economy ground to a halt in early 2020 thanks to the novel coronavirus pandemic, the global semiconductor industry actually rebounded during that time. Global semiconductor sales rose an impressive 6.9% year-over-year in the first quarter of 2020, on the back super-charged demand from the cloud and gaming end-markets,

This rally in Nvidia stock has materialized despite ostensibly large valuation risks for the semiconductor company. NVDA stock trades at 20-times trailing sales, 70-times trailing earnings, 47-times forward earnings, 46-times cash flow and 17-times book value.

None of those multiples are what any traditional investor would consider “attractive”. In fact, for a semiconductor stock, those multiples are historically outrageous, and defy logic.

Yet… Nvidia stock keeps powering higher.

Why? Because the growth story here just keeps getting bigger, and bigger, and bigger, and bigger.

So long as this remains the case, NVDA stock will continue to brush off near-term valuation friction, and keep charging higher.

The NVDA Stock Growth Story Keeps Getting Bigger

Twenty years ago, Nvidia just made specialized GPUs for a rather niche video game market.

Today, the company has morphed into the GPU backbone of essentially all of tomorrow’s most important industries, with an ever-expanding addressable market.

For starters, that niche video game market is now a huge, $200 billion global gaming market that is growing at a consistent ~10% pace. Nvidia’s GPUs power the most important games and devices in that market.

For example, the top three games in the world today (Fortnite, Minecraft and Animal Crossing) are all Nvidia platforms. As this market continues to grow thanks to digitization and eSports, Nvidia’s opportunity for long-term growth will continue to expand, too.

Meanwhile, Nvidia’s GPUs have also become the backbone of all-things-AI. Think cloud data-centers. Supercomputers. Voice assistants. Nvidia’s chips power all those things. The use of AI-enabled technologies will proliferate across all geographies and all industries over the next decade and become ubiquitous across the globe. As that happens, demand for Nvidia’s AI-enabled GPUs will continue to grow at a rapid pace.

There’s also the AR/VR industry, in which Nvidia is the dominant chip supplier. And the automobile industry, where Nvidia’s GPUs are powering the best self-driving technologies across the world. As AR/VR and self-driving tech both advance over the next decade, those advancements will only add more firepower to the already red-hot Nvidia growth narrative.

Net net, thanks to its positioning as the GPU backbone of everything from gaming to AI to self-driving, Nvidia’s opportunity for growth over the next decade is enormous and continually expanding. So long as management executes strongly against this promising opportunity, NVDA stock will likely keep rising.

Nvidia Stock Will Keep Brushing off Valuation Friction

To be clear, my math on Nvidia says that NVDA stock is overvalued here.

I assume the company grows its share of the global semiconductor market from 2.6% today, to 5% by 2025, and that revenues grow at a 15% compounded annual growth rate over that stretch. At the same time, I’m modeling for gross margin expansion to 70%+, and earnings per share to rise towards $20.

Based on a 20-times forward earnings multiple and a 10% annual discount rate, that equates to a 2020 price target for NVDA stock of less than $300.

Shares trade at $370 today.

So why am I not saying short the stock?

Because there is a visible pathway here for Nvidia to (in a best-case scenario) hit $30 in earnings per share by 2025. Doing the same math, that implies a 2020 price target for NVDA stock of over $400.

Sure, that’s only in a best-case scenario. But as discussed above, Nvidia’s opportunity is so big and the company is executing so flawlessly against that opportunity that the best-case scenario here seems increasingly likely. Indeed, if the company keeps this up for another few quarters, the best-case scenario of $30 in earnings per share will become the base case scenario.

To that end, I’m saying stick with the stock. So long as management keeps up the magic act, NVDA stock will keep flying higher.

Bottom Line on NVDA Stock

Nvidia stock is a long-term winner. There’s no doubt about that. The only doubt about this stock is with respect to the valuation, which is unarguably rich.

But that rich valuation continues to be offset by the company’s flawless execution in some super big, hyper-growth markets. So long as this remains the case, NVDA stock will keep brushing aside valuation risks, and keep powering higher.