Two tools bring AI into Obsidian, but they solve different problems. Smart Connections (over downloads) is a community plugin that builds local embeddings of your notes. It runs inside Obsidian, doesn't need Claude Code, and is free with local models.
Claude Code is a full agent that operates on your vault from the terminal. You can read files and write notes. You can also batch-process markdown or run bash commands. I use both tools together because they don't overlap.
Smart Connections surfaces connections. Claude Code acts on your vault. Many people run both.