OTTAWA — Canada needs to work with international partners in artificial intelligence to counter U.S. protectionism and the rising power of hyperscalers, Industry Minister Mélanie Joly told The Logic, in remarks that suggest a potential merger of Cohere with German AI firm Aleph Alpha could play a role in efforts to build a “trading bloc” of like-minded countries.

While careful not to comment on the talks specifically, Joly said Cohere is “a gem” that Canada needs to “be able to develop.” In conversations with the German government and businesses, she has stressed her goal to “build a national champion,” the minister added.

The world is going through a new “industrial revolution” powered by artificial intelligence and, eventually, quantum computing, Joly said Wednesday in the interview, adding the federal government considers AI to be an important driver of economic growth in Canada

“At the same time, we need to create a new trading bloc of countries that can counter U.S. protectionism, and… the power of the hyperscalers,” she said.

Joly was responding to a question about Toronto-based Cohere, which the German business daily Handelsblatt reported last week was in discussions to merge with Aleph Alpha, a startup based in Heidelberg that makes software to help businesses use AI. Both firms have made AI sovereignty part of their pitch, and secured the financial and commercial backing of governments and big businesses in their home countries.

The Canadian and German governments are being kept informed on deal talks, according to a source familiar with the matter. The Logic granted the person anonymity because they were not authorized to discuss the matter publicly. Cohere is likely to be the senior partner in any deal with Aleph Alpha, the source said.

Berlin has expressed support for the deal, without confirming it. “If leading AI companies from Canada and Germany were to join forces, it would send a very strong signal,” German Digital Minister Karsten Wildberger said in a statement to The Logic. AI touches on issues of sovereignty for his country and for Europe, he said. “That is why we need strong players who can bring together cutting-edge research, innovative products, and sovereign infrastructure.”

While AI Minister Evan Solomon oversees the sector, Joly is the minister in charge of the Investment Canada Act, which governs large and strategically significant takeovers of Canadian companies. That means an eventual deal could end up on her desk for review, which is why she said she cannot speak specifically about it. She said her answer would always be: “We will follow the process.”

Still, Joly spoke of the need to find a way forward at a time of “tense geopolitics” in a “much more chaotic and divided world.” That is one reason the federal government has been going to Europe and working on “reinforcing Cohere,” Joly said, adding that it is taking this approach with other Canadian companies with AI applications. 

“We need to be able to, concretely speaking, create this trading bloc, to have businesses working together, to anchor clear national champions that will then have an impact on the supply chain,” she said. “And that’s what we’re doing.”

Joly suggested the federal government wants to avoid a past pattern in Canadian business where “good stories” end badly because companies lack access to capital. “Right now I’m very much aware that we need to develop different trading relationships,” she said. “We need to put companies together to do business together.” 

Joly was speaking ahead of her trip next week to Hannover Messe, a major advanced manufacturing trade fair in northern Germany. Cohere will be among the nearly 100 Canadian exhibitors taking part.

Founded in September 2019, the firm is one of a handful around the world that develops its own foundational AI models. It also sells tools to businesses that let them analyze data and set up AI agents to which they can delegate workplace tasks. 

Cohere has raised about US$1.6 billion to date, according to PitchBook data, including a US$600 million round closed in September 2025 that valued it at US$7 billion and was co-led by Toronto-based Radical Ventures and Montreal-based Inovia Capital. Cohere’s investors also include federal agencies the Business Development Bank of Canada and Export Development Canada. It also has the backing of top domestic pension funds the Canada Pension Plan Investment Board, the Public Sector Pension Investment Board, the Ontario Municipal Employees Retirement System and the Healthcare of Ontario Pension Plan.

Ottawa is doing more than calling Cohere a national champion in the AI race. It awarded the firm $240 million to help pay for compute capacity and committing to test its products for potential adoption in the public service. Cohere has also partnered with major vendors hoping to win public-sector business, including telecom giant Bell and defence contractors Hanwha, Saab, Thales and TKMS. 

Earlier this week, Cohere chief AI officer Joelle Pineau said the firm will “always remain headquartered” in Canada. She had posted on X after questions at a parliamentary committee concerning the reports of the Aleph Alpha deal.

German institutions have heavily backed Aleph Alpha. Also founded in 2019, the firm got out of the foundation model business in mid-2024, instead focusing on software that clients use to build chatbots and AI applications. Customers include the German military, and the firm has raised about US$520 million to date, per PitchBook. 

But Aleph Alpha hasn’t announced new external financing since November 2023. Its major shareholder is now the Schwarz Group, the industrial conglomerate behind the Lidl discount grocery chain, which the Liberal government once considered courting to set up in Canada. Aleph Alpha founder Jonas Andrulis stepped down as CEO last October.

Chip behemoth Nvidia and German software giant SAP are investors in both Cohere and Aleph Alpha.