Cohere and Aleph Alpha join forces, with Lidl’s owner backing the deal

Canadian AI company Cohere is acquiring Germany-based Aleph Alpha, and the Schwarz Group — the people behind Lidl — is putting money behind it.

Both governments have signed off. The pitch is straightforward: give European enterprises an AI option that isn’t run by an American cloud giant or a Chinese platform. Sovereign AI, they call it.

Aleph Alpha has been around since 2019 and built a solid reputation in Europe for its work on large language models, especially in German and other European languages. They raised a ton of money early on — over $500 million — but like many European AI startups, they struggled to scale into a real business. Cohere, by contrast, has been more aggressive about commercialization, especially in enterprise settings.

This deal makes sense for both sides. Cohere gets a foothold in Europe with a team that already knows the regulatory landscape and has government trust. Aleph Alpha gets access to Cohere’s more mature product stack and a path to actually selling things at scale. The Schwarz Group gets a stake in something that could become the default AI provider for European companies that don’t want their data flowing through US servers.

The sovereign AI angle is real, not just marketing fluff. European regulations around data and AI are getting stricter. GDPR was just the beginning. The EU AI Act is coming. Enterprises that handle sensitive data — healthcare, finance, government contracts — are going to think twice before plugging into OpenAI or Google. Having a credible alternative that keeps data within European jurisdiction matters.

What I find interesting is that Aleph Alpha tried to go it alone for years. They built impressive tech, but building a business around LLMs is brutally expensive. The inference costs alone are staggering. Cohere has the distribution and the sales muscle that Aleph Alpha never quite developed.

Financially, the Schwarz Group’s involvement is the real signal here. They’re not a VC firm. They’re a massive retail and manufacturing conglomerate that runs one of the largest private IT operations in Europe. If they’re backing this, it’s because they see a real need for sovereign AI infrastructure in their own supply chain. That’s a much stronger vote of confidence than any pitch deck.

Of course, there are risks. Merging two AI companies with different cultures, tech stacks, and geographic bases is never smooth. Aleph Alpha’s team might not love being folded into a Canadian company’s roadmap. And the sovereign AI narrative only works if the product actually competes with the American labs on quality. If Cohere’s models aren’t good enough, no amount of data localization will save them.

But the timing is right. European enterprises are starting to ask hard questions about where their AI runs and who has access. Cohere and Aleph Alpha together can answer those questions in a way neither could alone.