Canadian AI company Cohere is acquiring Germany’s Aleph Alpha, supported by Germany’s Schwarz Group, which owns the Lidl grocery chain. This collaborative move aims to provide a sovereign AI alternative for businesses in a market predominantly controlled by American entities.
Both Cohere and Aleph Alpha focus on developing large language models, but while Aleph Alpha has gained regional recognition, it trails behind global leaders like OpenAI. Cohere, with a valuation of $6.8 billion, will lead the merged entity, pending necessary approvals. Schwarz Group, a principal investor in Aleph Alpha, is fully backing this venture, committing €500 million (around $600 million) to the new company, notably leveraging its cloud service, STACKIT.
Schwarz Group is also participating as a lead investor in Cohere’s Series E funding round, reportedly setting Cohere’s valuation at approximately $20 billion. This significant increase comes despite Cohere’s reported annual recurring revenue of $240 million in 2025, compared to Aleph Alpha’s previous financial struggles. Investors hope that this merger will enhance their performance.
The merger reflects a shift as companies seek alternatives to existing AI providers, ensuring greater privacy and independence. The new entity plans to serve highly-regulated sectors like defense, finance, energy, and healthcare, as well as public institutions. Aleph Alpha has previously created language models tailored for European clients, such as PhariaAI, but recent leadership changes created uncertainty regarding its strategic direction. Nonetheless, Aleph Alpha’s team of 250 experts could significantly enrich Cohere’s capabilities.
Cohere CEO Aidan Gomez emphasised the complementary nature of the companies’ focuses, with Aleph Alpha leaning towards small language models and European languages, while Cohere has broader ambitions for large-scale applications. This merger was announced at a press conference featuring key stakeholders, including representatives from both companies and Canadian and German digital ministers.
In the context of rising tensions with the United States, Canada is keen on fostering bilateral collaborations, particularly with Germany. The two countries have established a Sovereign Technology Alliance aimed at strengthening their AI capacities and reducing reliance on others for strategic technologies.
However, concerns remain about whether European organisations will consider this Canadian-German initiative sufficiently independent, especially regarding its long-term transatlantic ties. Gomez stated that “Cohere will become a Canadian-German company”, but with potential IPO plans, ownership structures could evolve further. This merger marks a strategic step in redefining the AI landscape, focusing on European sovereignty and collaboration in AI development.
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