What does it mean when Uncle Sam is one of your biggest shareholders? Chip startup xLight is about to find out

The Trump administration has agreed to inject up to $150 million into the economy xLighta semiconductor startup developing advanced chip-making technology marks the third time the U.S. government has taken an equity position in a private startup, further expanding a controversial strategy that Washington has placed on the capital tables of U.S. 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 Chips and Science Act of 2022 and represents the first Chips Act award of President Trump’s second term, although 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 earth startups also secured financing in exchange for equity from the Commerce Department last month.

You can imagine how all this goes in Silicon Valley, where the libertarian ethos runs deep. At TechCrunch’s signature Disrupt event in October, Sequoia Capital’s Roelof Botha jokingly said 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 venture capital firms have similarly, albeit quietly, expressed concerns about what it means if their portfolio companies suddenly find themselves competing with startups backed by the U.S. Treasury Department, or even if they sit 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 truly bold 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 chipmaking.

If it works, it could challenge the near-total dominance of ASML, the Dutch giant that has been listed on the stock exchange since 1995 and currently has an absolute monopoly on extreme ultraviolet lithography machines. (Shares are up 48.6% this year.)

xLight’s CEO is Nicholas Kelez, a veteran of quantum computers and government labs who probably knows his way around a particle accelerator. As executive chairman, the company is helmed by Pat Gelsinger, the former CEO of Intel who was dismissed late last year after his ambitious plans for a manufacturing revival failed to materialize.

“I wasn’t done yet,” says Gelsinger, general partner at Playground Global, who led the startup $40 million funding round this summer – told the Journal, adding that the effort is “very personal” to him.

xLight not only wants to compete with ASML, but goes much further. While ASML’s machines operate at wavelengths of approximately 13.5 nanometers, xLight focuses on 2 nanometers. Gelsinger claims the technology can increase wafer processing efficiency by 30% to 40% while using much less energy.

Coincidentally, both Kelez and Gelsinger will be at TechCrunch’s StrictlyVC event in Palo Alto on Wednesday night, where support from the government will undoubtedly come. (You can still get a seat here.)

For his part, Commerce Secretary Howard Lutnick insists this is all in service of national security and technology leadership, saying the partnership could “fundamentally rewrite the boundaries of chip manufacturing.” Critics will continue to question whether taxpayer-funded equity stakes represent visionary industrial policy or state capitalism with a patriotic sheen, though even skeptics recognize the geopolitical reality.

Botha, who described himself at Disrupt as “by nature a kind of libertarian, free market thinker,” at least conceded that industrial policy has its place when national interests require it. “The only reason the U.S. resorts to this is because we have other nation states that we compete with that use industrial policy to promote their industries that are strategic and perhaps detrimental to the U.S.’s long-term interests.”