diff --git a/apps/server/src/services/llm/ai_service_manager.ts b/apps/server/src/services/llm/ai_service_manager.ts
index 9e84d1e28..f054dff57 100644
--- a/apps/server/src/services/llm/ai_service_manager.ts
+++ b/apps/server/src/services/llm/ai_service_manager.ts
@@ -43,11 +43,7 @@ interface NoteContext {
 }
 
 export class AIServiceManager implements IAIServiceManager {
-    private services: Record<ServiceProviders, AIService> = {
-        openai: new OpenAIService(),
-        anthropic: new AnthropicService(),
-        ollama: new OllamaService()
-    };
+    private services: Partial<Record<ServiceProviders, AIService>> = {};
 
     private providerOrder: ServiceProviders[] = []; // Will be populated from configuration
     private initialized = false;
@@ -183,9 +179,42 @@ export class AIServiceManager implements IAIServiceManager {
      */
     getAvailableProviders(): ServiceProviders[] {
         this.ensureInitialized();
-        return Object.entries(this.services)
-            .filter(([_, service]) => service.isAvailable())
-            .map(([key, _]) => key as ServiceProviders);
+        
+        const allProviders: ServiceProviders[] = ['openai', 'anthropic', 'ollama'];
+        const availableProviders: ServiceProviders[] = [];
+        
+        for (const providerName of allProviders) {
+            // Use a sync approach - check if we can create the provider
+            const service = this.services[providerName];
+            if (service && service.isAvailable()) {
+                availableProviders.push(providerName);
+            } else {
+                // For providers not yet created, check configuration to see if they would be available
+                try {
+                    switch (providerName) {
+                        case 'openai':
+                            if (options.getOption('openaiApiKey')) {
+                                availableProviders.push(providerName);
+                            }
+                            break;
+                        case 'anthropic':
+                            if (options.getOption('anthropicApiKey')) {
+                                availableProviders.push(providerName);
+                            }
+                            break;
+                        case 'ollama':
+                            if (options.getOption('ollamaBaseUrl')) {
+                                availableProviders.push(providerName);
+                            }
+                            break;
+                    }
+                } catch (error) {
+                    // Ignore configuration errors, provider just won't be available
+                }
+            }
+        }
+        
+        return availableProviders;
     }
 
     /**
@@ -224,9 +253,12 @@ export class AIServiceManager implements IAIServiceManager {
 
             if (modelIdentifier.provider && availableProviders.includes(modelIdentifier.provider as ServiceProviders)) {
                 try {
-                    const modifiedOptions = { ...options, model: modelIdentifier.modelId };
-                    log.info(`[AIServiceManager] Using provider ${modelIdentifier.provider} from model prefix with modifiedOptions.stream: ${modifiedOptions.stream}`);
-                    return await this.services[modelIdentifier.provider as ServiceProviders].generateChatCompletion(messages, modifiedOptions);
+                    const service = this.services[modelIdentifier.provider as ServiceProviders];
+                    if (service) {
+                        const modifiedOptions = { ...options, model: modelIdentifier.modelId };
+                        log.info(`[AIServiceManager] Using provider ${modelIdentifier.provider} from model prefix with modifiedOptions.stream: ${modifiedOptions.stream}`);
+                        return await service.generateChatCompletion(messages, modifiedOptions);
+                    }
                 } catch (error) {
                     log.error(`Error with specified provider ${modelIdentifier.provider}: ${error}`);
                     // If the specified provider fails, continue with the fallback providers
@@ -240,8 +272,11 @@ export class AIServiceManager implements IAIServiceManager {
 
         for (const provider of sortedProviders) {
             try {
-                log.info(`[AIServiceManager] Trying provider ${provider} with options.stream: ${options.stream}`);
-                return await this.services[provider].generateChatCompletion(messages, options);
+                const service = this.services[provider];
+                if (service) {
+                    log.info(`[AIServiceManager] Trying provider ${provider} with options.stream: ${options.stream}`);
+                    return await service.generateChatCompletion(messages, options);
+                }
             } catch (error) {
                 log.error(`Error with provider ${provider}: ${error}`);
                 lastError = error as Error;
@@ -348,30 +383,49 @@ export class AIServiceManager implements IAIServiceManager {
     }
 
     /**
-     * Set up embeddings provider using the new configuration system
+     * Get or create a chat provider on-demand
      */
-    async setupEmbeddingsProvider(): Promise<void> {
-        try {
-            const aiEnabled = await isAIEnabled();
-            if (!aiEnabled) {
-                log.info('AI features are disabled');
-                return;
-            }
-
-            // Use the new configuration system - no string parsing!
-            const enabledProviders = await getEnabledEmbeddingProviders();
+    private async getOrCreateChatProvider(providerName: ServiceProviders): Promise<AIService | null> {
+        // Return existing provider if already created
+        if (this.services[providerName]) {
+            return this.services[providerName];
+        }
 
-            if (enabledProviders.length === 0) {
-                log.info('No embedding providers are enabled');
-                return;
+        // Create provider on-demand based on configuration
+        try {
+            switch (providerName) {
+                case 'openai':
+                    const openaiApiKey = await options.getOption('openaiApiKey');
+                    if (openaiApiKey) {
+                        this.services.openai = new OpenAIService();
+                        log.info('Created OpenAI chat provider on-demand');
+                        return this.services.openai;
+                    }
+                    break;
+                
+                case 'anthropic':
+                    const anthropicApiKey = await options.getOption('anthropicApiKey');
+                    if (anthropicApiKey) {
+                        this.services.anthropic = new AnthropicService();
+                        log.info('Created Anthropic chat provider on-demand');
+                        return this.services.anthropic;
+                    }
+                    break;
+                
+                case 'ollama':
+                    const ollamaBaseUrl = await options.getOption('ollamaBaseUrl');
+                    if (ollamaBaseUrl) {
+                        this.services.ollama = new OllamaService();
+                        log.info('Created Ollama chat provider on-demand');
+                        return this.services.ollama;
+                    }
+                    break;
             }
-
-            // Initialize embedding providers
-            log.info('Embedding providers initialized successfully');
         } catch (error: any) {
-            log.error(`Error setting up embedding providers: ${error.message}`);
-            throw error;
+            log.error(`Error creating ${providerName} provider on-demand: ${error.message || 'Unknown error'}`);
         }
+
+        return null;
     }
 
     /**
@@ -392,9 +446,6 @@ export class AIServiceManager implements IAIServiceManager {
             // Update provider order from configuration
             await this.updateProviderOrderAsync();
 
-            // Set up embeddings provider if AI is enabled
-            await this.setupEmbeddingsProvider();
-
             // Initialize index service
             await this.getIndexService().initialize();
 
@@ -462,7 +513,7 @@ export class AIServiceManager implements IAIServiceManager {
                 try {
                     // Get the default LLM service for context enhancement
                     const provider = this.getPreferredProvider();
-                    const llmService = this.getService(provider);
+                    const llmService = await this.getService(provider);
 
                     // Find relevant notes
                     contextNotes = await contextService.findRelevantNotes(
@@ -503,25 +554,27 @@ export class AIServiceManager implements IAIServiceManager {
     /**
      * Get AI service for the given provider
      */
-    getService(provider?: string): AIService {
+    async getService(provider?: string): Promise<AIService> {
         this.ensureInitialized();
 
-        // If provider is specified, try to use it
-        if (provider && this.services[provider as ServiceProviders]?.isAvailable()) {
-            return this.services[provider as ServiceProviders];
+        // If provider is specified, try to get or create it
+        if (provider) {
+            const service = await this.getOrCreateChatProvider(provider as ServiceProviders);
+            if (service && service.isAvailable()) {
+                return service;
+            }
         }
 
-        // Otherwise, use the first available provider in the configured order
+        // Otherwise, try providers in the configured order
         for (const providerName of this.providerOrder) {
-            const service = this.services[providerName];
-            if (service.isAvailable()) {
+            const service = await this.getOrCreateChatProvider(providerName);
+            if (service && service.isAvailable()) {
                 return service;
             }
         }
 
-        // If no provider is available, use first one anyway (it will throw an error)
-        // This allows us to show a proper error message rather than "provider not found"
-        return this.services[this.providerOrder[0]];
+        // If no provider is available, throw a clear error
+        throw new Error('No AI chat providers are available. Please check your AI settings.');
     }
 
     /**
@@ -550,7 +603,8 @@ export class AIServiceManager implements IAIServiceManager {
 
         // Return the first available provider in the order
         for (const providerName of this.providerOrder) {
-            if (this.services[providerName].isAvailable()) {
+            const service = this.services[providerName];
+            if (service && service.isAvailable()) {
                 return providerName;
             }
         }
@@ -634,13 +688,15 @@ export class AIServiceManager implements IAIServiceManager {
                         // Initialize embeddings through index service
                         await indexService.startEmbeddingGeneration();
                     } else {
-                        log.info('AI features disabled, stopping embeddings');
+                        log.info('AI features disabled, stopping embeddings and clearing providers');
                         // Stop embeddings through index service
                         await indexService.stopEmbeddingGeneration();
+                        // Clear chat providers
+                        this.services = {};
                     }
                 } else {
-                    // For other AI-related options, just recreate services
-                    this.recreateServices();
+                    // For other AI-related options, recreate services on-demand
+                    await this.recreateServices();
                 }
             }
         });
@@ -656,8 +712,12 @@ export class AIServiceManager implements IAIServiceManager {
             // Clear configuration cache first
             clearConfigurationCache();
 
-            // Recreate all service instances to pick up new configuration
-            this.recreateServiceInstances();
+            // Clear existing chat providers (they will be recreated on-demand)
+            this.services = {};
+
+            // Clear embedding providers (they will be recreated on-demand when needed)
+            const providerManager = await import('./providers/providers.js');
+            providerManager.clearAllEmbeddingProviders();
 
             // Update provider order with new configuration
             await this.updateProviderOrderAsync();
@@ -668,25 +728,6 @@ export class AIServiceManager implements IAIServiceManager {
         }
     }
 
-    /**
-     * Recreate service instances to pick up new configuration
-     */
-    private recreateServiceInstances(): void {
-        try {
-            log.info('Recreating service instances');
-
-            // Recreate service instances
-            this.services = {
-                openai: new OpenAIService(),
-                anthropic: new AnthropicService(),
-                ollama: new OllamaService()
-            };
-
-            log.info('Service instances recreated successfully');
-        } catch (error) {
-            log.error(`Error recreating service instances: ${this.handleError(error)}`);
-        }
-    }
 }
 
 // Don't create singleton immediately, use a lazy-loading pattern
@@ -759,7 +800,7 @@ export default {
         );
     },
     // New methods
-    getService(provider?: string): AIService {
+    async getService(provider?: string): Promise<AIService> {
         return getInstance().getService(provider);
     },
     getPreferredProvider(): string {
diff --git a/apps/server/src/services/llm/context/index.ts b/apps/server/src/services/llm/context/index.ts
index 258428705..c44eea9cb 100644
--- a/apps/server/src/services/llm/context/index.ts
+++ b/apps/server/src/services/llm/context/index.ts
@@ -33,7 +33,7 @@ async function getSemanticContext(
         }
 
         // Get an LLM service
-        const llmService = aiServiceManager.getInstance().getService();
+        const llmService = await aiServiceManager.getInstance().getService();
 
         const result = await contextService.processQuery("", llmService, {
             maxResults: options.maxSimilarNotes || 5,
@@ -543,7 +543,7 @@ export class ContextExtractor {
         try {
             const { default: aiServiceManager } = await import('../ai_service_manager.js');
             const contextService = aiServiceManager.getInstance().getContextService();
-            const llmService = aiServiceManager.getInstance().getService();
+            const llmService = await aiServiceManager.getInstance().getService();
 
             if (!contextService) {
                 return "Context service not available.";
diff --git a/apps/server/src/services/llm/embeddings/init.ts b/apps/server/src/services/llm/embeddings/init.ts
index 94188fa69..6ee4afe4b 100644
--- a/apps/server/src/services/llm/embeddings/init.ts
+++ b/apps/server/src/services/llm/embeddings/init.ts
@@ -45,8 +45,7 @@ export async function initializeEmbeddings() {
 
         // Start the embedding system if AI is enabled
         if (await options.getOptionBool('aiEnabled')) {
-            // Initialize default embedding providers when AI is enabled
-            await providerManager.initializeDefaultProviders();
+            // Embedding providers will be created on-demand when needed
             await initEmbeddings();
             log.info("Embedding system initialized successfully.");
         } else {
diff --git a/apps/server/src/services/llm/index_service.ts b/apps/server/src/services/llm/index_service.ts
index a179431ee..9d118e274 100644
--- a/apps/server/src/services/llm/index_service.ts
+++ b/apps/server/src/services/llm/index_service.ts
@@ -851,10 +851,6 @@ export class IndexService {
                 throw new Error("AI features must be enabled first");
             }
 
-            // Re-initialize providers first in case they weren't available when server started
-            log.info("Re-initializing embedding providers");
-            await providerManager.initializeDefaultProviders();
-
             // Re-initialize if needed
             if (!this.initialized) {
                 await this.initialize();
@@ -870,6 +866,13 @@ export class IndexService {
                 return;
             }
 
+            // Verify providers are available (this will create them on-demand if needed)
+            const providers = await providerManager.getEnabledEmbeddingProviders();
+            if (providers.length === 0) {
+                throw new Error("No embedding providers available");
+            }
+            log.info(`Found ${providers.length} embedding providers: ${providers.map(p => p.name).join(', ')}`);
+
             // Setup automatic indexing if enabled
             if (await options.getOptionBool('embeddingAutoUpdateEnabled')) {
                 this.setupAutomaticIndexing();
diff --git a/apps/server/src/services/llm/interfaces/ai_service_interfaces.ts b/apps/server/src/services/llm/interfaces/ai_service_interfaces.ts
index 3126691a4..4130a8d55 100644
--- a/apps/server/src/services/llm/interfaces/ai_service_interfaces.ts
+++ b/apps/server/src/services/llm/interfaces/ai_service_interfaces.ts
@@ -28,7 +28,7 @@ export interface AIServiceManagerConfig {
  * Interface for managing AI service providers
  */
 export interface IAIServiceManager {
-  getService(provider?: string): AIService;
+  getService(provider?: string): Promise<AIService>;
   getAvailableProviders(): string[];
   getPreferredProvider(): string;
   isProviderAvailable(provider: string): boolean;
diff --git a/apps/server/src/services/llm/pipeline/stages/context_extraction_stage.ts b/apps/server/src/services/llm/pipeline/stages/context_extraction_stage.ts
index 95d7620e2..b1eaa69f9 100644
--- a/apps/server/src/services/llm/pipeline/stages/context_extraction_stage.ts
+++ b/apps/server/src/services/llm/pipeline/stages/context_extraction_stage.ts
@@ -43,7 +43,7 @@ export class ContextExtractionStage {
 
             // Get enhanced context from the context service
             const contextService = aiServiceManager.getContextService();
-            const llmService = aiServiceManager.getService();
+            const llmService = await aiServiceManager.getService();
 
             if (contextService) {
                 // Use unified context service to get smart context
diff --git a/apps/server/src/services/llm/pipeline/stages/llm_completion_stage.ts b/apps/server/src/services/llm/pipeline/stages/llm_completion_stage.ts
index 7dd6984c8..6354e4c59 100644
--- a/apps/server/src/services/llm/pipeline/stages/llm_completion_stage.ts
+++ b/apps/server/src/services/llm/pipeline/stages/llm_completion_stage.ts
@@ -104,7 +104,7 @@ export class LLMCompletionStage extends BasePipelineStage<LLMCompletionInput, {
 
         // Use specific provider if available
         if (selectedProvider && aiServiceManager.isProviderAvailable(selectedProvider)) {
-            const service = aiServiceManager.getService(selectedProvider);
+            const service = await aiServiceManager.getService(selectedProvider);
             log.info(`[LLMCompletionStage] Using specific service for ${selectedProvider}`);
 
             // Generate completion and wrap with enhanced stream handling
diff --git a/apps/server/src/services/llm/pipeline/stages/model_selection_stage.ts b/apps/server/src/services/llm/pipeline/stages/model_selection_stage.ts
index a1c595b18..b51e59658 100644
--- a/apps/server/src/services/llm/pipeline/stages/model_selection_stage.ts
+++ b/apps/server/src/services/llm/pipeline/stages/model_selection_stage.ts
@@ -292,7 +292,7 @@ export class ModelSelectionStage extends BasePipelineStage<ModelSelectionInput,
             log.info(`Getting default model for provider ${provider} using AI service manager`);
             
             // Use the existing AI service manager instead of duplicating API calls
-            const service = aiServiceManager.getInstance().getService(provider);
+            const service = await aiServiceManager.getInstance().getService(provider);
             
             if (!service || !service.isAvailable()) {
                 log.info(`Provider ${provider} service is not available`);
diff --git a/apps/server/src/services/llm/providers/providers.ts b/apps/server/src/services/llm/providers/providers.ts
index 5b4955ce6..b9ae8b223 100644
--- a/apps/server/src/services/llm/providers/providers.ts
+++ b/apps/server/src/services/llm/providers/providers.ts
@@ -124,40 +124,113 @@ export function getEmbeddingProvider(name: string): EmbeddingProvider | undefine
 }
 
 /**
- * Get all enabled embedding providers
+ * Create providers on-demand based on current options
  */
-export async function getEnabledEmbeddingProviders(): Promise<EmbeddingProvider[]> {
-    if (!(await options.getOptionBool('aiEnabled'))) {
-        return [];
-    }
+export async function createProvidersFromCurrentOptions(): Promise<EmbeddingProvider[]> {
+    const result: EmbeddingProvider[] = [];
 
-    // Get providers from database ordered by priority
-    const dbProviders = await sql.getRows(`
-        SELECT providerId, name, config
-        FROM embedding_providers
-        ORDER BY priority DESC`
-    );
+    try {
+        // Create Ollama provider if embedding base URL is configured
+        const ollamaEmbeddingBaseUrl = await options.getOption('ollamaEmbeddingBaseUrl');
+        if (ollamaEmbeddingBaseUrl) {
+            const embeddingModel = await options.getOption('ollamaEmbeddingModel');
+            
+            try {
+                const ollamaProvider = new OllamaEmbeddingProvider({
+                    model: embeddingModel,
+                    dimension: 768, // Initial value, will be updated during initialization
+                    type: 'float32',
+                    baseUrl: ollamaEmbeddingBaseUrl
+                });
 
-    const result: EmbeddingProvider[] = [];
+                await ollamaProvider.initialize();
+                registerEmbeddingProvider(ollamaProvider);
+                result.push(ollamaProvider);
+                log.info(`Created Ollama provider on-demand: ${embeddingModel} at ${ollamaEmbeddingBaseUrl}`);
+            } catch (error: any) {
+                log.error(`Error creating Ollama embedding provider on-demand: ${error.message || 'Unknown error'}`);
+            }
+        }
+
+        // Create OpenAI provider if API key is configured
+        const openaiApiKey = await options.getOption('openaiApiKey');
+        if (openaiApiKey) {
+            const openaiModel = await options.getOption('openaiEmbeddingModel') || 'text-embedding-3-small';
+            const openaiBaseUrl = await options.getOption('openaiBaseUrl') || 'https://api.openai.com/v1';
 
-    for (const row of dbProviders) {
-        const rowData = row as any;
-        const provider = providers.get(rowData.name);
+            const openaiProvider = new OpenAIEmbeddingProvider({
+                model: openaiModel,
+                dimension: 1536,
+                type: 'float32',
+                apiKey: openaiApiKey,
+                baseUrl: openaiBaseUrl
+            });
 
-        if (provider) {
-            result.push(provider);
+            registerEmbeddingProvider(openaiProvider);
+            result.push(openaiProvider);
+            log.info(`Created OpenAI provider on-demand: ${openaiModel}`);
+        }
+
+        // Create Voyage provider if API key is configured
+        const voyageApiKey = await options.getOption('voyageApiKey' as any);
+        if (voyageApiKey) {
+            const voyageModel = await options.getOption('voyageEmbeddingModel') || 'voyage-2';
+            const voyageBaseUrl = 'https://api.voyageai.com/v1';
+
+            const voyageProvider = new VoyageEmbeddingProvider({
+                model: voyageModel,
+                dimension: 1024,
+                type: 'float32',
+                apiKey: voyageApiKey,
+                baseUrl: voyageBaseUrl
+            });
+
+            registerEmbeddingProvider(voyageProvider);
+            result.push(voyageProvider);
+            log.info(`Created Voyage provider on-demand: ${voyageModel}`);
+        }
+
+        // Always include local provider as fallback
+        if (!providers.has('local')) {
+            const localProvider = new SimpleLocalEmbeddingProvider({
+                model: 'local',
+                dimension: 384,
+                type: 'float32'
+            });
+            registerEmbeddingProvider(localProvider);
+            result.push(localProvider);
+            log.info(`Created local provider on-demand as fallback`);
         } else {
-            // Only log error if we haven't logged it before for this provider
-            if (!loggedProviderErrors.has(rowData.name)) {
-                log.error(`Enabled embedding provider ${rowData.name} not found in registered providers`);
-                loggedProviderErrors.add(rowData.name);
-            }
+            result.push(providers.get('local')!);
         }
+
+    } catch (error: any) {
+        log.error(`Error creating providers from current options: ${error.message || 'Unknown error'}`);
     }
 
     return result;
 }
 
+/**
+ * Get all enabled embedding providers
+ */
+export async function getEnabledEmbeddingProviders(): Promise<EmbeddingProvider[]> {
+    if (!(await options.getOptionBool('aiEnabled'))) {
+        return [];
+    }
+
+    // First try to get existing registered providers
+    const existingProviders = Array.from(providers.values());
+    
+    // If no providers are registered, create them on-demand from current options
+    if (existingProviders.length === 0) {
+        log.info('No providers registered, creating from current options');
+        return await createProvidersFromCurrentOptions();
+    }
+
+    return existingProviders;
+}
+
 /**
  * Create a new embedding provider configuration in the database
  */
@@ -257,130 +330,13 @@ export async function getEmbeddingProviderConfigs() {
 
 /**
  * Initialize the default embedding providers
+ * @deprecated - Use on-demand provider creation instead
  */
 export async function initializeDefaultProviders() {
-    // Register built-in providers
-    try {
-        // Register OpenAI provider if API key is configured
-        const openaiApiKey = await options.getOption('openaiApiKey');
-        if (openaiApiKey) {
-            const openaiModel = await options.getOption('openaiEmbeddingModel') || 'text-embedding-3-small';
-            const openaiBaseUrl = await options.getOption('openaiBaseUrl') || 'https://api.openai.com/v1';
-
-            registerEmbeddingProvider(new OpenAIEmbeddingProvider({
-                model: openaiModel,
-                dimension: 1536, // OpenAI's typical dimension
-                type: 'float32',
-                apiKey: openaiApiKey,
-                baseUrl: openaiBaseUrl
-            }));
-
-            // Create OpenAI provider config if it doesn't exist
-            const existingOpenAI = await sql.getRow(
-                "SELECT * FROM embedding_providers WHERE name = ?",
-                ['openai']
-            );
-
-            if (!existingOpenAI) {
-                await createEmbeddingProviderConfig('openai', {
-                    model: openaiModel,
-                    dimension: 1536,
-                    type: 'float32'
-                }, 100);
-            }
-        }
-
-        // Register Voyage provider if API key is configured
-        const voyageApiKey = await options.getOption('voyageApiKey' as any);
-        if (voyageApiKey) {
-            const voyageModel = await options.getOption('voyageEmbeddingModel') || 'voyage-2';
-            const voyageBaseUrl = 'https://api.voyageai.com/v1';
-
-            registerEmbeddingProvider(new VoyageEmbeddingProvider({
-                model: voyageModel,
-                dimension: 1024, // Voyage's embedding dimension
-                type: 'float32',
-                apiKey: voyageApiKey,
-                baseUrl: voyageBaseUrl
-            }));
-
-            // Create Voyage provider config if it doesn't exist
-            const existingVoyage = await sql.getRow(
-                "SELECT * FROM embedding_providers WHERE name = ?",
-                ['voyage']
-            );
-
-            if (!existingVoyage) {
-                await createEmbeddingProviderConfig('voyage', {
-                    model: voyageModel,
-                    dimension: 1024,
-                    type: 'float32'
-                }, 75);
-            }
-        }
-
-        // Register Ollama embedding provider if embedding base URL is configured
-        const ollamaEmbeddingBaseUrl = await options.getOption('ollamaEmbeddingBaseUrl');
-        if (ollamaEmbeddingBaseUrl) {
-            // Use specific embedding models if available
-            const embeddingModel = await options.getOption('ollamaEmbeddingModel');
-
-            try {
-                // Create provider with initial dimension to be updated during initialization
-                const ollamaProvider = new OllamaEmbeddingProvider({
-                    model: embeddingModel,
-                    dimension: 768, // Initial value, will be updated during initialization
-                    type: 'float32',
-                    baseUrl: ollamaEmbeddingBaseUrl
-                });
-
-                // Register the provider
-                registerEmbeddingProvider(ollamaProvider);
-
-                // Initialize the provider to detect model capabilities
-                await ollamaProvider.initialize();
-
-                // Create Ollama provider config if it doesn't exist
-                const existingOllama = await sql.getRow(
-                    "SELECT * FROM embedding_providers WHERE name = ?",
-                    ['ollama']
-                );
-
-                if (!existingOllama) {
-                    await createEmbeddingProviderConfig('ollama', {
-                        model: embeddingModel,
-                        dimension: ollamaProvider.getDimension(),
-                        type: 'float32'
-                    }, 50);
-                }
-            } catch (error: any) {
-                log.error(`Error initializing Ollama embedding provider: ${error.message || 'Unknown error'}`);
-            }
-        }
-
-        // Always register local provider as fallback
-        registerEmbeddingProvider(new SimpleLocalEmbeddingProvider({
-            model: 'local',
-            dimension: 384,
-            type: 'float32'
-        }));
-
-        // Create local provider config if it doesn't exist
-        const existingLocal = await sql.getRow(
-            "SELECT * FROM embedding_providers WHERE name = ?",
-            ['local']
-        );
-
-        if (!existingLocal) {
-            await createEmbeddingProviderConfig('local', {
-                model: 'local',
-                dimension: 384,
-                type: 'float32'
-            }, 10);
-        }
-    } catch (error: any) {
-        log.error(`Error initializing default embedding providers: ${error.message || 'Unknown error'}`);
-    }
+    // This function is now deprecated in favor of on-demand provider creation
+    // The createProvidersFromCurrentOptions() function should be used instead
+    log.info('initializeDefaultProviders called - using on-demand provider creation instead');
+    return await createProvidersFromCurrentOptions();
 }
 
 export default {
@@ -390,6 +346,7 @@ export default {
     getEmbeddingProviders,
     getEmbeddingProvider,
     getEnabledEmbeddingProviders,
+    createProvidersFromCurrentOptions,
     createEmbeddingProviderConfig,
     updateEmbeddingProviderConfig,
     deleteEmbeddingProviderConfig,
diff --git a/apps/server/src/services/llm/tools/note_summarization_tool.ts b/apps/server/src/services/llm/tools/note_summarization_tool.ts
index bc5999e0c..8fa5d39d8 100644
--- a/apps/server/src/services/llm/tools/note_summarization_tool.ts
+++ b/apps/server/src/services/llm/tools/note_summarization_tool.ts
@@ -102,12 +102,7 @@ export class NoteSummarizationTool implements ToolHandler {
             const cleanContent = this.cleanHtml(content);
 
             // Generate the summary using the AI service
-            const aiService = aiServiceManager.getService();
-
-            if (!aiService) {
-                log.error('No AI service available for summarization');
-                return `Error: No AI service is available for summarization`;
-            }
+            const aiService = await aiServiceManager.getService();
 
             log.info(`Using ${aiService.getName()} to generate summary`);
 
diff --git a/apps/server/src/services/llm/tools/relationship_tool.ts b/apps/server/src/services/llm/tools/relationship_tool.ts
index a7023981d..d0a91c98d 100644
--- a/apps/server/src/services/llm/tools/relationship_tool.ts
+++ b/apps/server/src/services/llm/tools/relationship_tool.ts
@@ -312,16 +312,7 @@ export class RelationshipTool implements ToolHandler {
             }
 
             // Get the AI service for relationship suggestion
-            const aiService = aiServiceManager.getService();
-
-            if (!aiService) {
-                log.error('No AI service available for relationship suggestions');
-                return {
-                    success: false,
-                    message: 'AI service not available for relationship suggestions',
-                    relatedNotes: relatedResult.relatedNotes
-                };
-            }
+            const aiService = await aiServiceManager.getService();
 
             log.info(`Using ${aiService.getName()} to suggest relationships for ${relatedResult.relatedNotes.length} related notes`);
 
diff --git a/apps/server/src/services/llm/tools/search_notes_tool.ts b/apps/server/src/services/llm/tools/search_notes_tool.ts
index 09b3fc645..152187dec 100644
--- a/apps/server/src/services/llm/tools/search_notes_tool.ts
+++ b/apps/server/src/services/llm/tools/search_notes_tool.ts
@@ -122,10 +122,10 @@ export class SearchNotesTool implements ToolHandler {
             // If summarization is requested
             if (summarize) {
                 // Try to get an LLM service for summarization
-                const llmService = aiServiceManager.getService();
-                if (llmService) {
-                    try {
-                        const messages = [
+                try {
+                    const llmService = await aiServiceManager.getService();
+                    
+                    const messages = [
                             {
                                 role: "system" as const,
                                 content: "Summarize the following note content concisely while preserving key information. Keep your summary to about 3-4 sentences."
@@ -147,13 +147,12 @@ export class SearchNotesTool implements ToolHandler {
                             } as Record<string, boolean>))
                         });
 
-                        if (result && result.text) {
-                            return result.text;
-                        }
-                    } catch (error) {
-                        log.error(`Error summarizing content: ${error}`);
-                        // Fall through to smart truncation if summarization fails
+                    if (result && result.text) {
+                        return result.text;
                     }
+                } catch (error) {
+                    log.error(`Error summarizing content: ${error}`);
+                    // Fall through to smart truncation if summarization fails
                 }
             }