Author: Rizwan Muhammad, Partner at Quartus Capital Partners
Artificial intelligence (AI) is transforming industries, driving innovation, and redefining how we approach challenges. At Quartus Capital Partners, we have seen firsthand how AI creates meaningful value when applied thoughtfully. It’s not about following trends or adopting technology for the sake of it—AI is a technology that, when used effectively, solves real-world problems and amplifies what already works.
There’s an ongoing debate about whether AI is overhyped or just another passing trend. While AI has existed for decades, however, recent advancements such as Transformers-based LLMs and significant progress in NLP, have proven to be transformative and disruptive, and resulting applications like chatGPT have created much of the hype. AI is here to stay. While some companies may be riding the hype wave, the questions we are focused on day in and day out are when and where AI can be applied effectively to solve real-world problems.
The AI landscape continues to evolve rapidly, and the recent release of DeepSeek V3/R1, an open-weight, high-performing LLM, has reignited discussions around AI’s trajectory. DeepSeek’s capabilities seemingly rival proprietary models at a fraction of the cost while being open-sourced has intensified the debate on innovation, leadership, and accessibility in AI development. While the initial reaction by most has been that this development will significantly reset the valuations in the space, we believe that this is the normal course of democratization of the technology that accelerates progress, fosters broader adoption, and gives a boost to the specialized applications.
Since DeepSeek's release, there has been a flurry of activity in the space that gave us o3 from OpenAI o3, Google’s Gemini 2.0 flash/pro, and even Tesla released Grok 3 in just a couple of months. And it is forcing more companies to consider going open-source / open-weight. There are valid concerns that open-weight models could heighten misinformation, security, and misuse risks. This development underscores the ongoing tension between innovation and responsibility, reinforcing the need for thoughtful deployment of AI—one that prioritizes real-world impact over hype. At Quartus, we continue to believe that AI’s true potential lies in strategic applications that complement strong business fundamentals rather than chasing the latest technological breakthroughs for their own sake.
This isn’t the first time we’ve seen this cycle played out. Technologies like the Internet, world wide web (www), and IoT all underwent periods of inflated expectations before becoming foundational technologies. AI is no different.
At Quartus, we view AI as a means to an end, not the sole focus. Our philosophy is simple: any company we invest in must stand on its own to solve a real business need, even without AI. This principle ensures that AI serves as a complement to strong business fundamentals rather than as a crutch.
Here’s how we apply AI in practice:
With the rise of AI comes the responsibility to use it ethically and effectively. Issues like data privacy, algorithm bias, and unintended misuse require vigilance. At Quartus, we ensure our portfolio companies uphold the highest standards in how they handle data and apply technology. AI is only as effective as the data, systems, and safeguards around them, and these must align with the best practices for ethical and effective use of AI.
AI is evolving rapidly, driven by data availability and computational power advances. What once seemed futuristic is now becoming the norm. That said, not every company using AI will succeed, and not every application will prove valuable in the long term.
Success in this space depends on using AI effectively—integrating it where it makes sense and focusing on sustainable growth. At Quartus, our portfolio investments leverage AI to address challenges that might be insurmountable without advanced technological approaches. We prioritize investing in companies with strong business fundamentals with an innovative and effective use of AI. This perspective ensures our focus remains on the transformative potential of AI to enable innovative solutions that not only complement but also elevate solid foundational strategies.
AI isn’t a passing trend, it’s a powerful and disruptive technology that, when used effectively, unlocks new opportunities and helps accelerate solutions to some of our most difficult challenges. At Quartus, we are committed to applying AI where it delivers real value, such as improving healthcare outcomes and solving complex industry challenges.
The key to AI’s success is simple: it works when paired with strong business fundamentals and applied with purpose. By focusing on what matters most, we’re using AI to drive measurable impact and build a better future.
