What happens when Uncle Sam becomes one of your major investors? Chip startup xLight is on the verge of discovering the answer

U.S. Government to Invest Up to $150 Million in xLight Semiconductor Startup

The Trump administration has reached an agreement to provide as much as $150 million in funding to xLight, a semiconductor startup focused on next-generation chip manufacturing technologies. This marks the third occasion where the U.S. government has acquired an equity stake in a private company, furthering a contentious approach that places Washington directly on the shareholder lists of American businesses.

According to The Wall Street Journal, the Commerce Department will allocate these funds to xLight in return for an ownership share, potentially making the government the startup’s largest investor. This investment is sourced from the 2022 Chips and Science Act and stands as the first Chips Act grant during President Trump’s second term, though the agreement is still in its early stages and may be revised.

Previous Government Equity Investments

Earlier investments by the Trump administration have included stakes in publicly traded firms such as Intel, MP Materials, Lithium Americas, and Trilogy Metals. Just last month, two startups in the rare earth sector also received funding from the Commerce Department in exchange for equity.

Silicon Valley’s Reaction

This growing trend has sparked debate in Silicon Valley, where a strong preference for minimal government intervention prevails. At TechCrunch’s Disrupt event in October, Sequoia Capital’s Roelof Botha humorously remarked on the situation, saying, “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 quietly voiced concerns about the implications of competing with startups that have U.S. Treasury backing, or even sharing boardrooms with government representatives.

xLight’s Ambitious Vision

xLight, a four-year-old company based in Palo Alto, California, is pursuing a bold goal in the semiconductor industry. The startup aims to develop particle accelerator-powered lasers—machines as large as a football field—to generate highly advanced and precise light sources for chip production.

If successful, xLight could challenge the dominance of ASML, the Dutch company that has held a monopoly on extreme ultraviolet lithography equipment since 1995. ASML’s stock has climbed nearly 49% this year, underscoring its market strength.

Leadership and Innovation

Leading xLight is CEO Nicholas Kelez, who brings experience from the quantum computing sector and government research labs. Supporting him as executive chairman is Pat Gelsinger, the former Intel CEO, who joined after departing Intel last year when his manufacturing turnaround plans fell short.

Gelsinger, who is also a general partner at Playground Global—the lead investor in xLight’s $40 million summer funding round—told the Journal, “I wasn’t done yet,” emphasizing the personal significance of this project.

Technological Leap

xLight’s ambitions extend beyond simply competing with ASML. While ASML’s systems operate at wavelengths near 13.5 nanometers, xLight is targeting an impressive 2 nanometers. Gelsinger asserts that this breakthrough could improve wafer processing efficiency by 30% to 40% while significantly reducing energy consumption.

Upcoming Discussions and Policy Debate

Kelez and Gelsinger are set to speak at TechCrunch’s StrictlyVC event in Palo Alto, where the topic of government investment is sure to be addressed.

Commerce Secretary Howard Lutnick maintains that these efforts are crucial for national security and technological leadership, suggesting the partnership could “fundamentally rewrite the limits of chipmaking.” While critics continue to debate whether taxpayer-funded equity stakes represent forward-thinking industrial policy or a form of state capitalism, even skeptics acknowledge the global competitive pressures at play.

At the Disrupt event, Botha—describing himself as a “sort of libertarian, free market thinker by nature”—admitted that industrial policy can be necessary when national interests are at stake. He noted, “The only reason the U.S. is resorting to this is because other countries are using industrial policy to advance their own strategic industries, which may not align with America’s long-term interests.”