Dear Friend:
Many might expect this quarter’s newsletter to discuss tariffs, wars, and market correction. Although the recent tariff announcements are concerning, we are carefully evaluating the implications and analyzing how we can turn uncertainty into opportunity. As we have often said, volatility is our friend. Our focus remains on identifying high-quality companies that can withstand uncertainty and, in many cases, emerge stronger from it. Rather than repeating these messages from prior newsletters – such as in April 2018’s Volatility is Back https://www.noesis-capital.com/1st-quarter-2018/ – we will instead focus on the AI revolution and how it will transform our future over the next 5 to 10 years.
At Noesis, we have been discussing the implications of AI for quite some time. As this powerful technology continues to advance, we believe it is important to understand both its potential and its impact, especially as it begins to reshape the way we live, work, and invest.
The Rise of Open AI Models and Accelerated Adoption
The early months of 2025 marked a major inflection point in AI adoption, driven by the release of several powerful open-source models. These platforms, like DeepSeek, have demonstrated that meaningful advances in AI can be achieved through smarter coding and computations. By sharing their open-source models, these companies showed the world that technological innovation is not built in a vacuum; scientists continually innovate based on previously shared technologies. For example, if Google scientists had not shared their revolutionary 2017 research paper on the Transformer model (Attention is All You Need), we probably would not be discussing AI as we do today.
The release of these advanced AI tools has rapidly accelerated adoption across industries. These models are capable of complex reasoning and problem-solving at a cost that is no longer confined to big corporations and research labs. By combining these models with AI-assisted development tools and application programming interfaces, even our team – with limited web development skills – can build an intranet website in just a few days. AI has entered our daily lives and workplaces, and we are already seeing the transformation.
Investment Shifts and Practical Applications
The emergence of open-source models is also reshaping investment trends in the AI sector:
• Re-evaluation of Infrastructure: The push toward lower-cost AI model training has prompted investors to reevaluate the need for massive capital expenditures on high-end hardware. While investment in AI infrastructure continues, there is a growing focus on optimizing resources.
• Shift Toward Applications: With reduced training costs, the focus is increasingly shifting from developing the underlying AI models to creating practical applications that utilize their capabilities. Therefore, more investment is flowing into companies building AI-powered software and services across industries.
• Increased Competition: Open-source platforms are lowering the barrier to entry for smaller companies, potentially increasing competition in the AI space. Increased competition could lead to a broader range of innovative solutions and disrupt existing market dynamics.
• Focus on Efficiency: Investors are paying more attention to companies that prioritize efficient AI development and deployment. This includes those developing new algorithms, software, and hardware solutions that reduce AI’s computational costs.
The Promise of Productivity
One of the most compelling arguments for AI adoption is its potential to significantly boost productivity. According to a report by the global consulting firm McKinsey & Company, AI could contribute up to $13 trillion to global GDP by 2030. McKinsey also notes that adopting generative AI in just a few business functions could have a significant impact. The blue dots in the chart below represent approximately 75% of AI’s estimated annual impact.
Source: McKinsey
The Workplace Transformed
The impact of AI extends profoundly into the workplace, signaling a transformation in how we work:
• Automation of Routine Tasks: AI is increasingly automating repetitive and data-driven tasks, allowing workers to focus on more creative and strategic endeavors. This could impact roles in data entry, customer support, and even some aspects of analysis.
• Job Transformation, Not Just Replacement: While some jobs may become automated, AI is also expected to create new roles – especially those involving uniquely human skills such as critical thinking, complex problem-solving, and interpersonal communication.
• The Rise of the AI-Augmented Workforce: The most successful professionals will be those who can effectively collaborate with AI, leveraging its capabilities to enhance performance. This will require new skills and a willingness to adapt to evolving working methods.
• Increased Productivity and Innovation: AI enables deeper insight generation and supports faster, more informed decision-making.
Consider the e-commerce industry, where AI-powered conversational commerce is rapidly expanding. Chatbots, virtual assistants, and messaging platforms are transforming how customers discover, research, and purchase products online. These tools enable personalized shopping experiences, leading to higher conversion rates and improved customer satisfaction. AI-driven chat support provides 24/7 assistance, resolving issues and guiding purchases – boosting both loyalty and sales. According to the research firm Future Market Insights Inc., the conversational commerce market is poised for rapid growth, surging from $8.8 billion in 2025 to $32.7 billion by 2035.
In the legal field, Harvey AI is helping law firms increase efficiency and productivity. It streamlines time-consuming tasks like legal research, document analysis, and contract review, allowing lawyers to focus on higher-level strategic work. Harvey AI can analyze large volumes of legal documents and data more accurately than humans, reducing the risk of errors.
Learning and Adapting
For individuals, this increased AI capability will likely lead to:
• Shift in Learning Focus: As AI takes on more specialized tasks and narrow expertise becomes commoditized, having a broader understanding of how to manage projects and solve problems across disciplines may become more valuable than deep expertise in a single area.
• Experience is More Valuable: As advanced AI tools become more accessible and deliver similar performance levels, human experience in coaching and deploying these tools becomes the true differentiation. Experience is more difficult to digitize than “knowledge,” and “prompt engineering” will be a critical skill for working efficiently with AI tools.
• More Rational Thinking: Today’s leading open models – including DeepSeek, OpenAI o1, and others – openly share the chain-of-thought (reasoning) behind each result it generates. Unlike humans, who may act on emotion or impatience, AI models methodically review each word in the question and prioritize them based on their importance in the whole context. With guidance from these systems, humans can adopt more rational, deliberate thinking.
Sharing in the AI Era
Open or closed is the question:
Suppose Google scientists had not shared their invention of reading and understanding large paragraphs and documents in the Transformer paper; we would not have today’s LLMs (Large Language Models) or ChatGPT (GPT stands for Generative Pre-Training Transformer). If DeepSeek had not shared its secret sauce for advancing in computing with limited hardware resources and capital, we would not have seen the enormous explosion of AI adoption or dreamt of testing an AI model in-house. Furthermore, we would not have envisioned the possibility of AI agents that not only provide answers to our questions but also complete tasks autonomously. And we certainly would not have imagined the eventual emergence of AGI (Artificial General Intelligence) – a system that can be at par with human intelligence and lead to a utopia where every decision is made with kindness, fairness, and logic.
Challenges and Considerations
Despite its promise, widespread AI adoption also presents serious challenges:
• Job Displacement: While AI will create new jobs, there is a risk of significant job displacement in the short term, particularly in routine-based work.
• Skills Gap: The changing nature of work will require individuals to acquire new skills, and there is risk of a growing skills gap if education and training do not keep up.
• Ethical Considerations: As AI becomes more powerful, it is crucial to address moral concerns related to bias, privacy, and the responsible use of technology.
Noesis’ Internal AI Efforts and Adoption
Noesis means “the process of learning,” and learning is always our first step when technology evolves. We are actively adopting AI to enhance our internal processes, streamline workflows, and increase efficiency. Our team is making strong progress in AI training and has launched several projects to adapt to this exciting technological shift. These internal initiatives are already improving our operational metrics and placing us among the early adopters of AI-driven advancements in our industry. Some of our initiatives include:
• Developing an internal AI hub to streamline operations and centralize knowledge.
• Using advanced AI tools to conduct our research to obtain more structured and insightful information with half the effort.
• Refreshing our website to include a Q&A Chatbot, allowing visitors to inquire about our shared knowledge base and investment philosophy.
• Leveraging AI in compliance and cybersecurity to auto-detect risks and simplify reporting, reducing the time and effort of monitoring and documentation.
Leveraging AI for Company Research and Portfolio Management
Beyond internal operations, we believe AI has the potential to shape markets and create opportunities for long-term investors. By understanding how this technology is evolving and how companies are applying it, we are better positioned to identify businesses that can benefit from AI integration and efficiency gains. In this rapidly changing environment, our goal is not only to participate in the AI-driven transformation but to use it as a strategic lens to evaluate which companies to invest in.
Conclusion: Adoption of Technology and Investment Opportunities
How fortunate we are at Noesis to live in this AI era! We get to work with super-intelligent tools that enhance our productivity and expand our capabilities. While challenges remain, the potential benefits – from breakthrough innovation to new investment opportunities – are immense. Importantly, these advancements allow us to dedicate more time to what matters most: our clients.
Please share your experiences using AI – we would love to hear your perspective.
Sincerely yours,
Shihfang Chuang