The Trump administration has taken an unprecedented step by positioning the federal government as the largest shareholder in xLight, a young semiconductor startup based in Palo Alto. The move comes through a commitment of up to $150 million in funding—an investment routed through the CHIPS and Science Act—that places Washington directly on the company’s cap table. While only preliminary, the agreement marks the third such equity-for-funding deal under the administration's expanding industrial policy strategy.

The infusion of federal capital has stirred a noticeable unease across Silicon Valley, a region that has long touted a culture of independence from government influence. At TechCrunch’s Disrupt conference, Sequoia Capital’s Roelof Botha quipped the old line, “I’m from the government, and I’m here to help,” capturing a wider anxiety among venture capitalists. Some investors have privately questioned what it means for their startups to compete—or share boardrooms—with companies backed by the U.S. Treasury.

At the center of this growing debate is the four-year-old xLight, which is attempting an ambitious leap in semiconductor manufacturing technology. The company is developing particle-accelerator-driven lasers—machines nearly the size of a football field—intended to produce far more powerful and precise light sources than anything used today. If the technology works, it could challenge the dominance of Dutch manufacturer ASML, which has maintained a tight grip over extreme ultraviolet (EUV) lithography since 1995. For CEO Nicholas Kelez, a veteran of quantum computing research and government labs, the project represents a bid to reshape an industry where one company has held near-total control.

Backing Kelez is former Intel chief executive Pat Gelsinger, now executive chairman at xLight and a general partner at Playground Global, which previously led the startup’s $40 million funding round. Gelsinger described the work as deeply personal, telling interviewers that his tenure at Intel left unfinished business in the realm of U.S. chip manufacturing. xLight’s target is a groundbreaking 2-nanometer wavelength—far beyond ASML’s current 13.5-nanometer systems—and early estimates suggest potential wafer-processing boosts of 30 to 40 percent with lower energy demands.

Commerce Secretary Howard Lutnick has defended the government’s equity approach as a matter of national and technological security. Speaking publicly, he argued that xLight’s work could “rewrite the limits of chipmaking,” framing the investment as part of a broader mission to restore America’s leadership in semiconductor production. Critics, however, question whether this strategy represents visionary planning or a pivot toward state capitalism under a patriotic banner. Yet even skeptics like Botha concede that industrial policy has become unavoidable, noting global competition from nations aggressively funding their own strategic technologies.

As Kelez and Gelsinger prepare to speak at TechCrunch StrictlyVC, their company’s unusual partnership with Washington is set to dominate the conversation—reflecting both the promise and the tension surrounding America’s renewed push to reclaim its edge in chip manufacturing.