US awards $500M to SandboxAQ to discover new chipmaking materials under CHIPS Act

The US Department of Commerce just wrote a half-billion-dollar check to a company most people have never heard of. SandboxAQ, an AI and advanced computing startup that spun out of Alphabet in 2022, landed a $500 million grant to develop new materials for semiconductor manufacturing.

The award, announced on June 17, falls under the CHIPS Act, the sprawling federal initiative designed to bring chipmaking back to American soil. But instead of funding another fabrication plant, this particular chunk of money is aimed at something arguably more fundamental: figuring out what chips should be made with in the first place.

What SandboxAQ is actually building

The company’s mandate under this grant covers three distinct problem areas, each tied to a critical vulnerability in the current semiconductor supply chain.

First, finding alternatives to PFAS chemicals. These are the so-called “forever chemicals” widely used in chip manufacturing that pose serious environmental and health risks. The industry knows it needs to move away from them, but viable replacements remain elusive.

Second, developing more efficient catalysts for semiconductor production processes. In English: making the chemical reactions involved in chipmaking faster, cheaper, and less wasteful.

Third, and perhaps most geopolitically significant, manufacturing rare-earth-free permanent magnets and batteries. These components are essential for semiconductor equipment, and right now, the supply chain for rare-earth minerals runs overwhelmingly through China. Eliminating that dependency is not just a business strategy. It is a national security priority.

SandboxAQ plans to tackle all three using AI-driven materials science, leveraging computational models to simulate and discover new compounds without the slow, expensive trial-and-error of traditional laboratory research.

The deal structure and what the government gets

The Commerce Department will take a minority equity stake in SandboxAQ as part of the arrangement. However, the government will not get a board seat or voting rights, meaning it won’t participate in decision-making processes.

The government will also secure royalties on any successful licenses that emerge from the research. So if SandboxAQ discovers a breakthrough replacement for PFAS chemicals or a rare-earth-free magnet that actually works at scale, Uncle Sam gets a cut of the licensing revenue.

For SandboxAQ, the $500 million represents a massive injection on top of the more than $1 billion the company has already raised from private investors. The startup was valued at $5.75 billion as of April 2025.

From Alphabet spinoff to semiconductor player

SandboxAQ’s origin story starts inside Google’s parent company. The firm was spun off from Alphabet in 2022 and initially positioned itself at the intersection of biotech and quantum computing. Since then, it has pivoted meaningfully toward materials science for semiconductor manufacturing, a transition that this grant essentially validates at the federal level.

The company’s investor roster includes Nvidia as a notable backer, which makes strategic sense given that any breakthrough in chipmaking materials would directly benefit the GPU giant’s own supply chain. Eric Schmidt, the former Google CEO, is also among the prominent investors who have poured capital into SandboxAQ.

Nvidia’s involvement as a SandboxAQ backer adds another layer. If the startup’s AI-driven materials research produces results, Nvidia benefits twice: once as an investor and once as a chipmaker whose own manufacturing processes could incorporate the discoveries.