The Trump administration has decided to allocate up to $150 million to xLight, a semiconductor startup focused on advanced chip-making technology. This marks the third instance of the U.S. government taking an equity stake in a private startup, broadening a contentious strategy that puts Washington on the capital tables of American companies.
According to a report by the Wall Street Journal, the Commerce Department will offer funding to xLight in exchange for an equity stake, likely positioning the government as the startup’s largest shareholder. This deal is backed by the 2022 Chips and Science Act and represents the first Chips Act funding in President Trump’s second term, although it remains preliminary and could change.
Previous equity investments made by the Trump administration include publicly traded companies like Intel, MP Materials, Lithium Americas, and Trilogy Metals. Additionally, two rare earths startups received funding for equity exchanges from the Commerce Department just last month.
This news hasn’t been well-received in Silicon Valley, known for its libertarian principles. During TechCrunch’s Disrupt event last October, Sequoia Capital’s Roelof Botha humorously pointed out the sensitive nature of government involvement, stating: “[Some] of the most dangerous words in the world are: ‘I’m from the government, and I’m here to help.’”
Other venture capitalists have also shown concern, albeit quietly, about what it means for their portfolio companies to compete against startups backed by the U.S. Treasury, especially when they find themselves at the same table as government representatives during board meetings.
The four-year-old company based in Palo Alto, California, aims to revolutionize semiconductor manufacturing. xLight is working on particle accelerator-powered lasers—massive machines that are the size of a football field—that would generate more powerful and precise light sources for chip production.
If successful, this could challenge the current monopoly held by ASML, the Dutch company that has been publicly traded since 1995 and dominates extreme ultraviolet lithography machines. (ASML’s shares have jumped 48.6% this year.)
Leading xLight is CEO Nicholas Kelez, a veteran of quantum computing and government labs who is well-acquainted with particle accelerators. Pat Gelsinger, the former Intel CEO, is assisting the startup as executive chairman after being let go last year due to failed manufacturing plans.
“I wasn’t done yet,” Gelsinger—who is also a general partner at Playground Global, which led the startup’s $40 million funding round this summer—told the Journal, adding that this project is “deeply personal” for him.
xLight aims not only to compete with ASML but to go much further. While ASML’s machines operate at wavelengths around 13.5 nanometers, xLight is targeting a groundbreaking 2 nanometers. Gelsinger asserts that this technology could improve wafer processing efficiency by 30% to 40% while consuming significantly less energy.
Both Kelez and Gelsinger will be featured speakers at TechCrunch’s StrictlyVC event on Wednesday night in Palo Alto, where the government’s support is likely to be a topic of discussion. (Seats are still available here.)
Commerce Secretary Howard Lutnick insists that this partnership is essential for national security and technological leadership, claiming it could “fundamentally rewrite the limits of chipmaking.” Critics continue to debate whether taxpayer-funded equity stakes signify forward-thinking industrial policy or state capitalism disguised as patriotism, though even skeptics recognize the geopolitical implications.
At least Botha, who identified as a “sort of libertarian, free market thinker by nature,” acknowledged that industrial policy has a role to play when national interests are at stake. “The only reason the U.S. is resorting to this is that we have other nation states using industrial policy to advance their strategic industries, which may not align with the long-term interests of the U.S.”
