Cohere CEO and co-founder Aidan Gomez took to the stage Thursday at the HumanX conference in San Francisco.Big Event Media/Getty Images
Canadian artificial intelligence company Kohia is in merger talks with German artificial intelligence giant Aleph Alpha, two people familiar with the matter said.
If the deal goes through, it would have a major impact on Canada’s AI ecosystem and Cohere’s ability to compete in a capital-intensive industry dominated by large U.S. technology companies.
The Globe and Mail is not authorized to discuss the matter publicly and is not identifying its sources.
Cohere spokesman Kyle Lastovica said the company does not comment on rumors or speculation, but noted that Canada and Germany collaborate on all aspects of technology. “Cohere is meeting with companies and institutions in Germany and across Europe,” he said.
Aleph Alpha representatives did not respond to requests for comment.
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The merger will be a politically sensitive issue. Cohere is a company critical to the Canadian government’s AI ambitions. Countries around the world, including Canada and Germany, are looking to strengthen their AI industries to ensure autonomy and control over powerful and profitable technologies. The headquarters and address of the new organization are of great importance to both countries.
Kohia is the larger of the two companies and its core presence and intellectual property are expected to remain in Canada if the deal goes ahead, one of two people familiar with the matter said.
German publication Handelsblatt, which first reported the talks, said the new company would have offices in Canada and Germany, and the German government would be its main customer.
The Globe’s sources say Canada’s federal government was informed of the talks early on.
AI Minister Evan Solomon’s office said in a statement that it does not comment on commercial negotiations between companies. The statement added that Canada and Germany are close technology partners and the secretariat supports Canadian AI companies as they grow and compete globally.
Cohere is one of the few international players building large-scale language models (LLMs) that are the basis for generative AI applications. Last year, the company signed an agreement with the federal government to identify opportunities for public services to adopt AI, and in 2024 the City of Ottawa announced it would provide $240 million to Cohere to train the new model in Canada. Solomon has frequently defended Cohere, especially as Ottawa prepares to release a new AI strategy.
Patrick Pichette, a partner at Inovia Capital and a member of the federal government’s AI task force, wrote in a submission last fall that as part of its future strategy, Ottawa should declare Cohere a national champion and “boost it with significant revenue contracts,” such as $1 billion each for civil service and defense applications. (Inovia is an investor in Cohere.)
Cohere was founded in 2019 by Aidan Gomez, Nick Frosst, and Ivan Zhang. The trio have been vocal about remaining in Canada. “We started our company here because we love it here,” Frost said in an interview earlier this year. “I’m deeply invested in Canada, so we have a deep community here.”
Cohere co-founder Nick Frost at his Toronto office in 2024. The company’s three co-founders have been vocal about remaining in Canada.Christopher Katsarov/Globe and Mail
both Governments in Canada and the European Union are concerned about the dominance of U.S. AI and cloud computing companies, especially amid trade tensions under U.S. President Donald Trump, and are focusing on ways to support domestic alternatives.
Earlier this year, Canada and Germany signed an agreement to deepen cooperation on building sovereign AI capabilities and reducing dependence on a small number of technology providers.
The deal with Aleph Alpha could give Kohia greater access to the German and wider European markets. Both companies have some similarities. Both are focused on corporate and government clients rather than consumers, with an emphasis on privacy, security, and ensuring clients have control over their data.
Cohere has won domestic and international customers including Royal Bank of Canada, Fujitsu, and LG CNS. The company was valued at around US$7 billion in its latest funding round last September, and generated annual recurring revenue of US$240 million last year.
Aleph Alpha has a slow growth pace. The company last raised about US$500 million in November 2023 from German industrial giants SAP SE and Bosch, among others. But it has since put aside building its own LLM to focus on helping enterprise and government customers deploy AI tools, regardless of which company manufactures the underlying models.
if Even if the deal between Cohere and Aleph Alpha goes ahead, the new company will still face significant challenges competing with deep-pocketed U.S. rivals like OpenAI, Anthropic and Google. Anthropic has been particularly popular with enterprise customers, with the company announcing this month that its revenue run rate has exceeded $30 billion.
