The U.S. government has agreed to invest $150 million into xLight, a Silicon Valley-based developer of new technologies for semiconductor manufacturing.

Why it matters: This would be the Trump administration's first new award under the CHIPS Act, a Biden-era law designed to boost domestic chip production and research.

• It also continues the White House's trend of taking equity stakes in private companies, acting like something akin to a venture capital fund, whereas the CHIPS Act had been intended to provide grants and other incentives.
• Also worth noting that, earlier this year, Trump told Congress to "get rid of" the CHIPS Act.

Catch up quick: xLight was founded in 2021 and this past summer raised $40 million in Series B funding led by Playground Global — with Playground partner and former Intel CEO Pat Gelsinger becoming xLight's executive chairman.

Zoom in: I spoke briefly this morning with Nicholas Kelez, xLight's CEO and CTO, to better understand the deal and what his company does. What follows is an edited transcript of our conversation:

Axios: How did this award come about?

Kelez: "Two months ago there was a request for applications that came out of CHIPS, which was specific to lithography. This letter of intent is the next step in accepting our proposal. It was an incredibly fast turnaround.

• "In general we've been engaged with CHIPS for over two years, just like anyone else involved in semiconductors."

Did you always expect this to be equity vs. a grant?

"Not all the terms have been negotiated yet, it's still a letter of intent, except that the government will be a minority shareholder. So I don't want to go too far into that until we finalize the details over the next month or two."

What does xLight do?

"At the heart of advanced semiconductor manufacturing is lithography, which is the process that writes the features on the chips. When we want to make better-performing chips, it's lithography that drives that.

• "Light is key to lithography, but current light technology has reached its limitations. We address the need for more and better light by changing the paradigm. Rather than small integrated light sources, we're building outside the fab at utility-scale, the same way you'd do for power generation."

You're talking football field-sized facilities, right?

"At the maximum, yes. And you need to be robust to enter the semiconductor manufacturing environment. But we have paths to shrink that."

Does this government deal replace your next VC funding round?

"It doesn't replace it, but does help us accelerate our schedule. The intent of this money is to help us do our next fundraise earlier by creating an anchor for the next round and for building prototypes faster.

• "This is a very audacious plan to build something big, and hardware is expensive."

Any worries that some VC firms might avoid a startup whose largest outside investor is the U.S. government?

"We wouldn't have done this if we have those concerns, although certainly some people have those opinions.

• "The landscape of industrial policy has changed and I'm grateful that the U.S. government is looking at keeping the country competitive in different ways. Other governments are investing billions in this exact space, light sources for lithography."

Torque Capital Group acquired Joe Gibbs Manufacturing Solutions, a maker of composites and assemblies for aerospace and defense applications, from Joe Gibbs Racing.

Why it's the BFD: It's not often that you see a manufacturer pivot from race cars to rockets.

Zoom in: NASCAR in 2022 mandated that its teams mostly use common vehicle parts and vendors, which limited the value of Joe Gibbs Racing's in-house manufacturing business, Torque managing partner Jonathan Saltzman tells Axios.

• Gibbs' late son, Coy, recognized that the group's capabilities could be redirected toward aerospace and defense.
• It secured customers, but couldn't always fulfill demand because of facility size limitations and the parent company's racing focus.
• Thus the carveout by Torque, which includes a rebranding and 60,000 square feet of new manufacturing space in Huntersville, North Carolina.

The bottom line: Start you engines.

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Nvidia (Nasdaq: NVDA) yesterday announced a $2 billion into chip-design software company Synopsys (Nasdaq: SNPS), as part of an expanded strategic partnership.

• Synopsys shares rose 4.8% on the news.

It's the latest circular AI deal, and came just hours after OpenAI took a stake in Thrive Holdings — a rollup strategy launched by OpenAI backer Thrive Capital.