U.S. Takes Major Stake in Chip Startup xLight With $150 Million Strategic Investment

The U.S. government is taking an equity stake in semiconductor startup xLight. A deal for up to $150 million was confirmed this week. This marks the third time the Trump administration has taken an ownership position in a private company.

The funding comes from the 2022 Chips and Science Act. According to The Wall Street Journal, the Commerce Department will become the startup’s largest shareholder. This move deepens a controversial strategy of using taxpayer funds to buy into American tech firms.

Expanding a Controversial Federal Strategy

This is not an isolated case. The government has previously taken equity in public companies like Intel and MP Materials. Last month, two rare earths startups also secured similar deals.

The strategy has sparked debate in Silicon Valley. Many venture capitalists are uneasy about competing with the U.S. Treasury. The idea of government officials on a startup’s board is a new reality for the industry.

xLight’s Ambitious Bid to Challenge a Monopoly

XLight aims to revolutionize chip manufacturing. The four-year-old Palo Alto company is developing particle accelerator-powered lasers. These massive machines could create more precise light sources for etching chips.

If successful, xLight could challenge ASML. The Dutch company holds a monopoly on critical chip-making machines. XLight’s technology targets more advanced 2-nanometer processes, promising greater efficiency.

The startup is led by CEO Nicholas Kelez and executive chairman Pat Gelsinger. Gelsinger is the former Intel CEO and a partner at Playground Global, which led a recent $40 million round. He calls the xLight mission “deeply personal.”

Commerce Secretary Howard Lutnick defends the investment. He says it serves national security and could “rewrite the limits of chipmaking.” Critics see it as state capitalism, while supporters cite global competition.

The $150 million stake in xLight represents a significant escalation in the government’s hands-on approach to rebuilding America’s semiconductor industry, signaling that federal equity investments are becoming a core tool of modern industrial policy.

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What is the Chips and Science Act?

The Chips and Science Act is a 2022 law providing billions in funding for U.S. semiconductor research and manufacturing. Its goal is to bolster domestic chip production and reduce reliance on foreign suppliers.

Why is the government taking equity stakes?

The government argues taking an equity stake aligns its interest with the company’s long-term success. It also allows taxpayers to potentially benefit financially if the startup succeeds, unlike a traditional grant.

Who is ASML and why is it important?

ASML is a Dutch company that is the world’s only maker of extreme ultraviolet lithography machines. These multi-million-dollar machines are essential for producing the most advanced computer chips, giving ASML a critical global monopoly.

What are the risks of this strategy?

Risks include taxpayer money being lost if startups fail. It also raises concerns about government influence in private markets and potential crowding out of private venture capital investment.

Has this been done before?

Yes. This is the third direct equity investment by the Trump administration in a private startup under the Chips Act framework. Previous investments targeted rare earths and critical materials companies.