The Trump administration has agreed to inject up to $150 million into xLight, a semiconductor startup developing advanced chip-making technology, marking the third time the U.S. government has taken an equity position in a private startup and further expanding a controversial strategy that has put Washington on the cap tables of American companies.
The Wall Street Journal reported Monday that the Commerce Department will provide the funding to xLight in exchange for an equity stake that will likely make the government the startup’s largest shareholder. The deal uses funding from the 2022 Chips and Science Act and represents the first Chips Act award in President Trump’s second term, though it remains preliminary and subject to change.
Previous government equity investments under the Trump administration include publicly traded companies Intel, MP Materials, Lithium Americas, and Trilogy Metals. Two rare earths startups also secured funding in exchange for equity from the Commerce Department last month.
You can imagine how this is all going over in Silicon Valley, where the libertarian ethos runs deep. At TechCrunch’s signature Disrupt event back in October, Sequoia Capital’s Roelof Botha jokingly offered what might be the understatement of the year when asked about the trend: “[Some] of the most dangerous words in the world are: ‘I’m from the government, and I’m here to help.’”
Other VCs have similarly expressed concerns, if quietly, about what it means when their portfolio companies are suddenly competing against startups backed by the U.S. Treasury, or even when they find themselves sitting across the table from government representatives at board meetings.
The four-year-old, Palo Alto, California, company at the center of this particular experiment is trying to do something genuinely audacious in semiconductor manufacturing. XLight wants to build particle accelerator-powered lasers — machines the size of a football field, mind you — that would create more powerful and precise light sources for making chips.
If it works, it could challenge the near-total dominance of ASML, the Dutch giant that has been publicly traded since 1995 and currently enjoys an absolute monopoly on extreme ultraviolet lithography machines. (Its shares have surged 48.6% this year.)
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The CEO of xLight is Nicholas Kelez, a quantum computing and government labs veteran who presumably knows his way around a particle accelerator. Helping this venture as executive chairman is Pat Gelsinger, the former Intel CEO who was shown the door late last year after his ambitious manufacturing revival plans failed to materialize.
“I wasn’t done yet,” Gelsinger — a general partner at Playground Global, which led the startup’s $40 million funding round this summer — told the Journal, adding that the effort is “deeply personal” to him.
Indeed, xLight doesn’t just want to compete with ASML but to go much further. While ASML’s machines work at wavelengths around 13.5 nanometers, xLight is targeting 2 nanometers. Gelsinger claims the technology could boost wafer processing efficiency by 30% to 40% while using far less energy.
As it happens, both Kelez and Gelsinger will be holding forth at TechCrunch’s StrictlyVC event on Wednesday night in Palo Alto, where the government’s backing will no doubt come up. (You can still nab a seat here.)
Commerce Secretary Howard Lutnick, for his part, insists this is all in service of national security and technological leadership, saying the partnership could “fundamentally rewrite the limits of chipmaking.” Critics will continue to question whether taxpayer-funded equity stakes represent visionary industrial policy or state capitalism with a patriotic sheen, though even skeptics acknowledge the geopolitical reality.
At least Botha, who described himself at Disrupt as a “sort of libertarian, free market thinker by nature,” conceded that industrial policy has its place when national interests demand it. “The only reason the U.S. is resorting to this is because we have other nation states with whom we compete who are using industrial policy to further their industries that are strategic and maybe adverse to the U.S. in long-term interests.”