How AI’s Growth Led To A Real Sovereignty Market And A Major Exit

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Germany’s AI infrastructure has reached a new milestone in 2026, with the launch of the Industrial AI Cloud in Munich and significant public and private investments. This infrastructure, combined with a major merger between Aleph Alpha and Cohere, marks a shift in the European sovereignty market and model ownership, making the topic highly relevant for global AI and tech policy discussions.

On February 4, 2026, Deutsche Telekom and NVIDIA officially launched the Industrial AI Cloud in Munich, featuring nearly 10,000 Blackwell-GPUs, representing approximately 0.5 exaFLOPS of computing power. This setup, fully privately financed, increased German AI capacity by about 50%, with SAP serving as a platform partner for the ‘Germany-Stack.’ Major industrial players like Siemens, Mercedes-Benz, and BMW are among the initial clients.

Simultaneously, the Schwarz Group announced plans to expand its StackIT ambitions, aiming to deploy up to 100,000 GPUs with an investment estimated at 11 billion euros, positioning itself as a European hyperscaler. The German government allocated 805 million euros in 2026 for a European AI gigafactory, with a consortium including SAP, Telekom, Siemens, IONOS, and Schwarz Group preparing a joint EU bid—Europe’s answer to the US’s Stargate project.

European policymakers introduced the Cloud and AI Development Act, emphasizing the reduction of dependency on US cloud providers and promoting free software principles. The market’s demand for sovereign AI services is evidenced by procurement decisions, such as the Federal Office for the Protection of the Constitution choosing French firm ChapsVision over US-based Palantir, and the Bundeswehr excluding Palantir from cloud projects.

However, a major development emerged on April 24, 2026: Aleph Alpha, long considered a flagship of German AI sovereignty, announced a merger with Canadian startup Cohere. The combined valuation is around 20 billion dollars, with Schwarz Group investing 600 million dollars in Cohere’s Series E round. The merger raises questions about the real locus of model sovereignty, as Cohere’s headquarters and development are split between Toronto and Heidelberg.

Analysts interpret the merger in two ways: as a strategic consolidation to compete against global giants like OpenAI and Google, or as a sign that Germany’s AI sovereignty is increasingly dependent on North American entities, especially given that every ‘sovereign’ German AI data center relies on US-made NVIDIA GPUs. The real control over models appears to be shifting outside Europe, despite infrastructure and funding efforts.

Legal and regulatory frameworks, including the EU AI Act and German laws, provide a compliance environment but do not fully address the layered nature of sovereignty—particularly the fact that hardware, software, and regulation are distributed across different jurisdictions.

Implications of Market Consolidation and Model Ownership

This development underscores a key challenge for European AI sovereignty: control over the model layer remains elusive, as ownership and development increasingly occur outside Europe. The merger exemplifies how financial investments and infrastructure do not guarantee full sovereignty, especially when core components like silicon and models are tied to non-European entities. For European policymakers and industry stakeholders, this raises critical questions about the effectiveness of current strategies and the need to focus on controlling the entire AI stack.

While infrastructure and funding are in place, the shift of model development and ownership to North America suggests that true sovereignty remains a layered and complex goal. The situation highlights the importance of developing independent model capabilities if Europe aims for genuine technological sovereignty, rather than just infrastructure control.

European AI Infrastructure and Sovereignty Efforts in 2026

Since early 2026, Germany has made significant strides in establishing AI infrastructure, highlighted by the launch of the Industrial AI Cloud in Munich, which features nearly 10,000 NVIDIA GPUs and is fully privately funded. The German government allocated over 800 million euros for a European gigafactory, and a consortium including SAP, Telekom, Siemens, and Schwarz Group is preparing a joint EU bid. These initiatives aim to reduce dependency on US and Chinese cloud providers and foster a sovereign AI ecosystem.

European legislation, such as the Cloud and AI Development Act, emphasizes reducing reliance on foreign cloud providers and promotes open-source principles, reflecting a strategic push for sovereignty. Despite these efforts, the procurement choices of agencies like the BfV and Bundeswehr show a preference for non-US vendors, indicating a desire for independence in operational infrastructure.

However, the recent Aleph Alpha-Cohere merger reveals a contrasting reality: model development and ownership are increasingly influenced by North American entities, with the majority of high-performance chips and core AI models still tied to US and Canadian firms. This disparity underscores the layered nature of sovereignty — infrastructure is European, but models are not yet fully under European control.

“The infrastructure is in Munich, but the chips are in Santa Clara. Sovereignty in AI is now a question of layers, not just geography.”

— an anonymous researcher

Unresolved Questions About Model Sovereignty

It remains unclear whether European policymakers and industry players will succeed in developing independent, European-owned AI models at scale. The long-term impact of the Aleph Alpha-Cohere merger on model sovereignty is still uncertain, as the majority of core AI development appears to be happening outside Europe. Additionally, the future control over the chips and hardware layer, still dominated by US companies, complicates the sovereignty narrative further.

Next Steps in European AI Sovereignty Strategies

European stakeholders are expected to continue investing in infrastructure, funding research, and fostering collaborative projects like the European gigafactory. The focus will likely shift toward building independent model development capabilities and establishing regulatory frameworks to reinforce sovereignty. Monitoring how the Aleph Alpha-Cohere integration unfolds and whether new European model champions emerge will be key in assessing progress toward genuine sovereignty.

Key Questions

Does the Aleph Alpha-Cohere merger mean Europe has lost control over AI models?

The merger suggests that model ownership and development are increasingly influenced by North American entities, raising concerns about European control. However, infrastructure and funding remain European, so sovereignty is layered and not entirely lost.

What does the German AI infrastructure in Munich involve?

It includes nearly 10,000 NVIDIA GPUs, representing about 0.5 exaFLOPS, fully privately financed, with initial clients like Siemens, Mercedes-Benz, and BMW, and aims to reduce reliance on foreign cloud providers.

Will Europe develop its own AI models soon?

It is still uncertain. While investments are increasing, the majority of high-performance model development remains outside Europe, and building independent models at scale is a complex challenge that requires more time and resources.

How does regulation affect European AI sovereignty?

The EU AI Act and national laws provide a regulatory framework, but sovereignty depends on control over hardware, software, and models, which are distributed across different jurisdictions. Regulation alone cannot guarantee full sovereignty.

Source: ThorstenMeyerAI.com