1) Because desirable internships have more candidate applications than available slots. E.g. Google has 40,000 students wanting an internship but only 1500 slots.[1] With that supply & demand ratio, Google can be selective via difficult coding tests.

2) Even though internships are unpaid, companies evaluate interns to potentially offer permanent employment. If so, a company like Google would want to fill those 1500 slots with "the best" rather than randomly pull from 40000 candidates.

That's how it is at the hot tech companies. Maybe other internship programs outside of tech sectors such as Peace Corps think of interns differently.

[1] https://www.fastcompany.com/1683136/how-to-actually-land-an-...