Aleph Alpha & Cohere: The Quiet Sale of Germany's AI Hope
What is being marketed as a "merger" in Germany appears to be a bailout by Cohere, which speaks volumes about Europe’s difficult path toward digital sovereignty.
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Sometimes, you can’t tell if a company has been acquired just by reading the press release; rather, you have to look at the capital structure behind it. That is exactly the case with Aleph Alpha and Cohere. The official terms used are “merger,” “transatlantic AI alliance,” and “global AI champion.” These terms sound like equality, a German-Canadian partnership, and politically desired technological sovereignty.
The sober reality, however, is different. Cohere agreed to acquire Aleph Alpha through a stock swap to expand into Europe and broaden its customer base to include government agencies and corporate clients especially in Germany. Period. The purchase price was not disclosed.
According to a Handelsblatt report (only available behind a paywall in German), Cohere shareholders will receive approximately 90 percent of the combined company, and Aleph Alpha shareholders will receive the remaining 10 percent. This likely corresponds to the two companies’ revenue ratio. Meanwhile, the Schwarz Group, one of Aleph Alpha’s most important investors, is investing $600 million in Cohere’s next funding round.
This essentially clarifies the core of the transaction. Legally and in terms of communication, one might frame this as a merger. However, economically, it is effectively a takeover of the so-called “pioneer of German IT excellence” by the Canadians. Cohere brings a larger platform, stronger financing, international scale, and control. Aleph Alpha primarily contributes European credibility and customer relationships in the European public sector.
This differs from the rise of a supposed German AI champion in a transatlantic merger of equals. Neither a press conference with German Digital Minister Karsten Wildberger and his Canadian counterpart Evan Solomon, nor a flowery press release (only available in german) about a “decisive step toward a technologically sovereign future for both countries,” changes this.
The Brief History of a German AI Hope
Aleph Alpha was founded in Heidelberg in 2019 by Jonas Andrulis and Samuel Weinbach. Their grand vision was to create a European response to major American AI labs. Aleph Alpha aimed to develop powerful language models that could operate under European data protection and sovereignty requirements.
Their “Luminous” model was the technological core of the original “German OpenAI” narrative and was touted as the German response to GPT. This story resonated, especially in Germany, as it represented a company delving deeper into the AI stack rather than just building an app based on American infrastructure.
Public interest peaked in 2023. At that time, Aleph Alpha raised more than $500 million in a funding round. Participants included the Schwarz Group, Bosch Ventures, SAP, HPE, and other investors. The Schwarz Group explicitly justified its investment at the time with sovereign AI, European data protection, and the development of generative AI for complex and critical applications, such as infrastructure and supply chains.
That was the big Aleph Alpha story: AI as a trustworthy infrastructure for European governments, industries, and regulated sectors. To be fair, one must acknowledge: Aleph Alpha certainly had its merits. The company focused early on explainability, source attribution, European data storage, and the public sector. While many AI startups were merely building ChatGPT wrappers, Aleph Alpha had a distinct strategic positioning. A deal with Cerebras to deliver an AI supercomputer for the German Armed Forces demonstrated Aleph Alpha’s role in security-critical German AI projects.
Nevertheless, Aleph Alpha must be considered a failure today. It failed to establish itself as an independent, scalable AI company capable of competing with OpenAI, Anthropic, Google, Meta, and the French Mistral.
Consequently, Aleph Alpha abandoned the development of large language models in 2024 and shifted its focus to specialized AI applications for businesses. This was no small pivot. By doing so, Aleph Alpha had effectively abandoned its original ambition to be a frontrunner in the race for the world’s most powerful AI models.
Germany’s Desire for Digital Independence
The deal is still portrayed so positively in the German mass media because of a deep-seated German desire. Germany wants to finally become more digitally independent. It no longer wants to be just a customer of Microsoft, Amazon, Google, Nvidia, OpenAI, and Meta. No longer realizing with every new wave of technology that crucial platforms, chips, clouds, operating systems, and models are being developed elsewhere.
As a German citizen and taxpayer, I can completely understand this desire. When it comes to AI, it’s not just about efficiency and productivity. It’s also about data, administration, critical infrastructure, defense, healthcare, and industrial value creation. This is precisely why the official press release on the Cohere-Aleph-Alpha deal emphasizes an independent, enterprise-ready, and sovereign alternative in an era of increasing AI concentration. Organizations in Europe should control their AI stacks rather than ceding control to U.S. providers or infrastructures.
Politically, too, the deal fits perfectly into the current climate. In early 2026, Germany and Canada launched a Sovereign Technology Alliance on the sidelines of the Munich Security Conference to reduce strategic technology dependencies and build sovereign AI capabilities. Thus, the transaction is not just a corporate deal; it is also a staged industry policy move.
This is precisely why the language is as important as it is misleading. “Merger” sounds like a new beginning. “Takeover” sounds like surrender. “Global AI champion” sounds better than “German AI hope is being integrated into a Canadian company.” As investors, however, we should pay less attention to PR jargon and more attention to ownership, control, and capital flows. In that regard, very little remains on the German side after the transaction.
Cohere: The Canadian Alternative to OpenAI
Like Aleph Alpha, Cohere was founded in 2019, but in Toronto. From the beginning, the company has positioned itself as an enterprise AI provider. Cohere builds foundation models and AI solutions for businesses. Between 2021 and 2025, Cohere raised approximately $1.5 billion in five major funding rounds, and the company was most recently valued at $6.8 billion.
The key difference from Aleph Alpha lies in scaling. In the seven years since its founding, Cohere has built significantly more capital, partnerships, and commercial traction internationally. In May 2025, Reuters reported that Cohere had doubled its annualized revenue to around $100 million, driven by secure, custom AI tools for enterprise customers in regulated industries. According to the report, around 85 percent of the business came from private deployments, i.e., customer-specific, isolated deployments outside public clouds.
Therefore, Cohere is by no means a smaller version of OpenAI. Rather, it is a serious, well-funded enterprise AI provider with a clear focus on regulated business customers. Strategically, Cohere and Aleph Alpha are a good fit. Both companies promote secure, controllable, and sovereign AI. Both steer clear of pure consumer hype. They both aim to serve companies and government agencies for which data protection, compliance, and control are more important than the most entertaining chatbot.
However, that is precisely why it is obvious who is acquiring whom here.
Why this “Merger” is more like a “Fire Sale”
The key figure is the 90/10 split. If Cohere shareholders receive around 90 percent of the combined company and Aleph Alpha shareholders receive around 10 percent, then it’s clear that this is not a merger of equals. It’s a combination in which one side clearly dominates. This becomes even clearer when you look at the capital flows: The Schwarz Group isn’t investing new money in Aleph Alpha; rather, it is investing $600 million in Cohere. Meanwhile, the combined company is set to collaborate with the Schwarz Group and its cloud service, STACKIT, which is positioned as a European hyperscaler.
For Cohere, Aleph Alpha is a strategic gateway to Europe. The company gains access to German and European customers, political connections, sovereignty narratives, and the Schwarz Group’s infrastructure. Conversely, for Aleph Alpha, Cohere is the platform that enables its survival and growth.
This isn’t what a triumph looks like. This is what a bailout within a larger structure looks like.
The Role of the Schwarz Group
The Schwarz Group is perhaps the most intriguing player in this story. It is not just any German tech investor. Behind it stands one of Europe’s largest retail groups. Under its umbrella are Lidl, one of the world’s largest discount supermarket chains, and Kaufland, a major European supermarket chain, among others. However, the group now has serious digital and cloud ambitions through Schwarz Digits and STACKIT. As early as 2023, Schwarz, along with other investors, invested in Aleph Alpha to promote the development of AI technology that aligns with European data protection standards.
In January 2026, the group sought to expand its stake in Aleph Alpha further by acquiring the shares held by Bosch Ventures. Officially, this was justified as a vote of confidence in sovereign AI solutions and a step toward strengthening European digital sovereignty.
However, this role is now shifting. Schwarz isn’t remaining an Aleph Alpha investor, but it is becoming the lead investor in the upcoming Cohere funding round. Meanwhile, STACKIT is poised to become the technical backbone of the sovereign offering. The merged company will provide a sovereign offering via STACKIT, and Schwarz will support Cohere’s Series E financing with $600 million.
From Schwarz’s perspective, this makes strategic sense. If Aleph Alpha alone does not grow large enough to be a genuine alternative to U.S. AI labs, it makes sense to combine its cloud assets with those of a larger AI company. This could give Schwarz more influence over a relevant enterprise AI provider than it previously had over an isolated German startup with limited scalability.
For Aleph Alpha, however, this is a bitter pill to swallow. Its most important German investor is no longer placing its next big AI bet solely on Aleph Alpha, but rather on Cohere.
Why are German Media Outlets Still Calling it a Merger?
In my view, it’s no coincidence that many German media outlets are portraying the deal as such.
First, this mirrors the language of the official press release, which uses terms such as “joining forces,” “combined entity,” “transatlantic alliance,” and “new global AI powerhouse.”
Second, “merger” aligns better with the political agenda. German Digital Minister Karsten Wildberger spoke of a “global AI champion” and an alternative “Made in Germany, Made in Canada.” However, there was no official mention that Cohere will hold about 90 percent of the merged company and Aleph Alpha will hold about 10 percent.
Third, there is a strong desire to avoid the perception that one of Germany’s few AI flagship companies is a failed project. Germany needs success stories in the tech sector. Thus, a takeover becomes a merger. Loss of control becomes sovereignty. Aleph Alpha goes from being a target to a partner.
This is understandable from a personal standpoint. However, from an analytical perspective, it is dangerous to sugarcoat things, as is far too often the case in German politics.
Conclusion: Not a Merger and Certainly not a Success Story
There are two ways to interpret this deal. The optimistic interpretation is that a German-Canadian AI alliance is emerging, supported by two governments and the Schwarz Group. This alliance has European cloud infrastructure and a focus on sovereign AI for regulated industries. This is better than if Aleph Alpha had simply disappeared.
The more realistic interpretation, however, is: Germany’s great AI hope has lost the battle for independent scaling. Aleph Alpha did not become the European OpenAI. Not even the European Cohere. Instead, Aleph Alpha is becoming part of Cohere, and the Canadian company will apparently control around 90 percent of the combined entity.
Strategically, the deal looks like a fire sale of the original ambition. The dream of an independent German AI champion is being sold - not to the U.S., but to Canada.
This may be a more conciliatory version of failure. However, it is still a failure of the original plan. Aleph Alpha set out to make Germany and Europe more independent in the field of AI. Ultimately, Aleph Alpha needs a foreign partner to continue this narrative of sovereignty.
The real lesson lies therein: Digital sovereignty isn’t created through press conferences, political slogans, or national darlings. It is achieved through capital, talent, infrastructure, customers, speed, and pragmatism. Aleph Alpha was ultimately too small in all these dimensions, so this acquisition is the logical consequence.