Canadian AI startup Cohere is acquiring Germany-based Aleph Alpha, with government backing, to offer enterprises a sovereign alternative to dominant U.S. AI players. The combined entity aims to provide systems where companies and governments retain full control over their data, avoiding reliance on American tech giants like Microsoft or Google.
While both companies develop large language models and have been hometown stars, they lag behind OpenAI globally. This is not a merger of equals: Cohere, last valued at $6.8 billion, will lead the new entity after integrating Aleph Alpha, pending regulatory and shareholder approval.
Key financial backing comes from Schwarz Group, a German retail conglomerate already invested in Aleph Alpha. It will provide €500 million (about $600 million) in structured financing to the combined entity, which in turn will run on STACKIT, Schwarz Digits' sovereign cloud platform. Cohere is also raising a Series E round led by Schwarz Group, with the combined company valued at around $20 billion—a leap not justified by revenue alone, as Cohere reported $240 million in annual recurring revenue in 2025 and Aleph Alpha had little revenue.
Investors are betting consolidation improves odds against larger rivals. This mirrors talks of a three-way partnership between Elon Musk's xAI, France's Mistral AI, and Cursor, though Mistral may resist tying up with an American company.
Cohere and Aleph Alpha will target highly regulated industries—defense, energy, finance, healthcare, manufacturing, telecom—and the public sector. Aleph Alpha's specialized models (e.g., PhariaAI) and its team of 250 will complement Cohere's focus on large models. Aleph Alpha's pivot away from frontier models and founder departure weakened its negotiating position.
Canada and Germany recently launched a Sovereign Technology Alliance to strengthen sovereign AI capacity. Cohere CEO Aidan Gomez stated, "Cohere will become a Canadian-German company," though this promise may be tested if the company goes public, placing ownership with global shareholders.