Why is Cohere integrated with Aleph Alpha?

Canadian AI startup Cohere has acquired Germany-based Aleph Alpha with backing from Schwarz Group (parent company of grocery chain Lidl). With the blessing of their governments, the companies intend to offer a sovereign alternative to enterprises in an AI landscape dominated by American players.

As two companies developing large language models, Aleph Alpha and Cohere were stars in their hometowns, while still lagging far behind OpenAI and its ilk globally. But regardless of the similarities, this is not an alliance of equals. Cohere, most recently valued at $6.8 billion, will lead the new entity that will include Aleph Alpha, subject to approval by authorities and shareholders.

The Schwarz Group, one of Aleph Alpha’s major shareholders, has fully joined the deal. The retail giant will now become a strategic backer of the new entity with structured funding of €500 million (about $600 million) – and with expectations that it will leverage STACKIT, the sovereign cloud service of its IT division Schwarz Digits.

As part of its investment, Schwarz Group is also acting as lead investor for Cohere in its Series E funding round – and has already set the price. According to German business media outlet Handelsblatt, the term sheet pegs the valuation at around $20 billion.

This would be a huge jump that combined revenues alone could not justify. While Cohere reported $240 million in annual recurring revenue in 2025, Aleph Alpha had previously had little revenue and significant losses. But investors are betting that teaming up will improve their chances.

They may not be alone in their thinking. Elon Musk’s AI startup xAI has reportedly discussed a three-way partnership with French companies Mistral AI and Cursor, which SpaceX recently secured an option to buy. But it remains unclear whether the French company is interested in risking undermining its position as an alternative to the American technology that has boosted its revenues.

Cohere also hopes to gain support from organizations looking for alternatives to AI service providers that may not meet their requirements when it comes to privacy and independence. The new entity plans to target highly regulated industries – including defence, energy, finance, healthcare, manufacturing and telecommunications – as well as the public sector.

Aleph Alpha has also developed specialized language models targeting companies and public institutions in Europe, such as the PhariaAI group. The subsequent pivot and departure of co-founder and CEO Jonas Androulis made its strategy and leadership less clear, but its 250-person team and their expertise can still complement Cohere.

“Their focus on small language models, European languages, and tokens is really complementary to our focus, which is more of a general focus on large language models,” Cohere CEO Aidan Gomez said in a press conference announcing the plans on Friday.

The press conference lineup was also telling. Instead of Aleph Alpha’s co-CEOs, it was co-founder Samuel Weinbach who joined Gomez on stage alongside Schwarz Group’s chief digital officer, Rolf Schumann. German Digital Minister Carsten Wildberger and his Canadian counterpart Evan Solomon also participated in the event.

Amid rising tensions with the United States, Canada has become increasingly eager to sign bilateral initiatives with a variety of partners, including Germany. With a shared interest in privacy and security, the two countries recently launched the Sovereign Technology Alliance to “enhance sovereign AI capability and reduce strategic technology dependencies.”

The question remains whether European organizations will view an initiative involving Canada as sufficiently sovereign, or whether they will trust that the alliance will remain transatlantic in the long term. According to Gomez, “Coherr will become a German-Canadian company.” But ownership may soon become less clear if the IPO is still on the cards.