AIExchangeOpinionLearning
|6 min ReadFrom Nvidia to Binance: Selling Shovels is the Strongest Business Model
Jax Morales
Senior Analyst
Published
Jan 16, 2026
"As long as people keep digging, the shovel sellers will never lose."
From the California Gold Rush to today’s cryptocurrency boom and the AI wave, history always repeats itself. In every cycle, the real big winners aren’t necessarily the "miners" directly competing, but the ones providing the "shovels." Selling shovels is the most robust business model that can survive and thrive through market cycles and uncertainty.
The AI Gold Rush: Nvidia Strikes Rich
In 2025, the AI wave is in full swing, and everyone is talking about AI, with the likes of ChatGPT leading the way. However, the true story of this wave isn’t just about AI applications exploding—it’s a computational revolution, and Nvidia is at the center of it all.
Meta, Google, Amazon, and Microsoft are all racing to develop massive AI models, but the real gold is being mined by Nvidia, which dominates the high-performance GPU market. Companies desperate to build AI models must buy or lease massive amounts of GPU power, and with every iteration of models, they must pay for training and inference resources.
In other words, while the world debates whether AI can change the world and how profitable AI applications can become, anyone entering the game must first pay their "entrance fee" to the power providers.
Nvidia has positioned itself at the top of this computational food chain. With GPUs like the H100, H200, and B100 in high demand, Nvidia doesn't need to bet on which AI model will win. It simply needs the entire industry to keep "betting" on AI, generating continuous demand for its products.
Additionally, Nvidia is not just selling hardware—it has built a robust ecosystem around its products, including CUDA software, development tools, and framework support. This dual moat of technology and ecosystem solidifies its place at the top.
Nvidia’s success isn’t just a one-off—it is backed by a whole "shovel supply chain." From high-speed interconnects to cooling systems, and from storage to circuit boards, companies supplying components for AI servers are riding the wave, benefiting massively in this growing market.
This is the beauty of the "sell shovel" model: the miners may fail, but as long as people are digging, the shovel sellers are always in the money.
The Crypto "Shovel Sellers"
If Nvidia is the "shovel seller" in the AI space, then the equivalent in the crypto world is—exchanges.
The crypto industry has evolved, but one thing has remained constant: exchanges print money. Since the first true global bull market in 2017, to the DeFi summer in 2020, and now the 2024–2025 Bitcoin ETF and Meme boom, the narrative and players have changed, but exchanges like Binance have always stayed at the top of the food chain.
Regardless of market swings, exchanges consistently profit from trading volumes. Whether prices are up or down, they make money on transaction fees. With leveraged products, futures, and perpetual contracts forming their profit moat, exchanges are guaranteed to benefit from the volatility.
While DeFi was once hailed as the future, centralized exchanges (CEX) remained the go-to for liquidity, risk management, and derivative products. Even as new narratives emerge, exchanges continue to dominate as the entry and exit point for capital, capturing fees along the way.
Besides exchanges, there are many other "shovel sellers" in the crypto space. For example, Bitmain makes profits by selling mining machines instead of mining itself. Infura, Alchemy, and other API providers benefit from the growth of blockchain applications. Tether and Circle profit from issuing stablecoins and earning the "seigniorage" of digital dollars.
These companies don’t need to bet on which blockchain or token will be the winner. As long as speculation and liquidity remain, they’ll continue printing money.
Why "Selling Shovels" is the Ultimate Business Model
The reality of business is much harsher than many imagine. Innovation is often a high-risk endeavor. Success requires not only individual effort but also the alignment with broader historical processes.
In any cyclical industry, the results often play out like this:
Top-level applications (mining) are about chasing Alpha (excess returns). You need to pick the right direction, the right timing, and outsmart competitors. The odds are low, but the rewards are high—one wrong move, and you lose it all.
Infrastructure providers (shovel sellers), on the other hand, earn Beta. As long as the entire industry grows and the number of players keeps increasing, they benefit from scale and network effects. Selling shovels is about probability, not luck.
Nvidia doesn’t need to pick the winning AI model, and Binance doesn’t need to figure out which narrative will last the longest. They just need one thing: everyone continues playing the game.
In a monopoly situation, the shovel sellers hold the power. Once that monopoly is established, pricing power shifts entirely to the sellers, as seen with Nvidia’s 73% gross margin.
To put it bluntly:
Shovel-selling companies make money from the "industry existence tax."
Mining companies make money from the "time window arbitrage."
The key difference is that "selling shovels" is a macro bet—“this industry will continue growing,” while doing applications is a brutal competition to be "the chosen one." The probability of success for shovel sellers is much higher, mathematically speaking.
For retail investors or entrepreneurs, this is a crucial lesson: If you can’t figure out who the ultimate winner will be, or which asset will continue to rise, invest in those providing tools to everyone, selling shovels, or even just selling jeans.
Here’s a final piece of data to consider: Ctrip’s Q3 net profit of ¥19.92 billion surpassed that of Kweichow Moutai (¥19.2 billion) and Xiaomi (¥11.3 billion).
Don’t just focus on who’s shining brightest in the story—think about who is continuously collecting fees in every story.
In times of frenzy, serving the frenzy while staying calm is the highest form of business wisdom.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.