Cohere to acquire Aleph Alpha in sovereign AI push

Canadian AI startup Cohere is acquiring Germany-based Aleph Alpha to create a sovereign AI alternative for enterprises. In this context, sovereign AI refers to systems where companies and governments retain full control over their own data, rather than routing it through U.S. tech giants like Microsoft or Google. Subject to approval by authorities and shareholders, Cohere will lead the new entity incorporating Aleph Alpha. The transaction is backed by €500 million in structured financing (approximately $600 million) from the German retail conglomerate Schwarz Group, which serves as a key financial backer and lead investor.

The combined entity expects to run on STACKIT, a sovereign cloud platform operated by Schwarz Digits, the IT division of Schwarz Group. According to German business media outlet Handelsblatt, the combined entity’s valuation is set at around $20 billion. This represents a significant jump from Cohere’s previous valuation, which was last valued at $6.8 billion. To fund the expansion, Cohere is raising a Series E round of financing—a late-stage venture capital financing round—with Schwarz Group serving as the lead investor. The combined entity aims to leverage Cohere’s financial performance, which reached $240 million in annual recurring revenue (ARR)—a key subscription performance metric—in 2025, alongside Aleph Alpha’s team of 250 people.

The transaction comes amid broader discussions of consolidation in the transatlantic AI sector. For instance, Elon Musk’s xAI has reportedly discussed a three-way partnership with France-based Mistral AI and Cursor, an entity that SpaceX recently secured an option to buy. However, Mistral AI may be hesitant to partner with xAI due to its positioning as an alternative to U.S. tech, as a partnership with an American company could complicate that identity. For Cohere, the acquisition of the Germany-based startup brings complementary technical capabilities. “Their focus on small language models, European languages and tokenizers is a really complementary one to our own, 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.

Why it matters

The merger aims to create a sovereign AI alternative for enterprises in a landscape dominated by American players, while combining Cohere’s large language model focus with Aleph Alpha’s specialized enterprise models.