The U.S. Department of Commerce has signed a definitive agreement to award SandboxAQ $500 million in CHIPS Act research funding to develop new chemicals and materials for semiconductor manufacturing.
The Commerce Department said the award will fund the development and deployment of SandboxAQ’s ReAQT materials discovery platform, which uses the company’s Large Quantitative Models, or LQMs, to help evaluate potential new chip materials. The platform combines physics and chemistry simulations, AI optimization and high-throughput screening to assess millions of candidates before the most promising are tested in the lab. The work will focus on PFAS alternatives, fabrication catalysts, rare-earth-free magnets, and battery chemistries for fab backup power, with SandboxAQ expected to work with U.S. manufacturers to move viable materials into commercial production.
The agreement was made through the CHIPS R&D Office’s Investment Fund Path, launched in April to allow the department to invest in companies and negotiate returns through equity, royalties or revenue sharing. The Commerce Department will receive a minority, noncontrolling stake in SandboxAQ, giving it a direct financial interest in the company and any commercial results from the research. Reuters reported that the stake carries no voting rights or board seat and that the department will receive royalties if successful formulas are licensed to industrial partners. The size of the stake was not disclosed.
Bill Fraunhofer, executive director of Semiconductor Investment and Innovation, said the award is meant to address “critical input constraints” in the domestic semiconductor industry by accelerating the discovery of new materials and chemistries.
For semiconductor manufacturers, the four research areas address different operational risks. PFAS, also known as forever chemicals, are used in applications including heat transfer fluids, lubricants, insulating coatings and surface treatments. The award will fund SandboxAQ’s work on substitutes that can meet or exceed semiconductor manufacturing equipment requirements without the persistence and toxicity concerns associated with existing compounds.
The catalyst work will focus on materials used to produce semiconductor process chemicals and treat exhaust gases from fab operations. The Commerce Department said domestic catalyst development could reduce dependence on foreign suppliers for both catalyst formulations and process technology. SandboxAQ said it will build on its AQCat catalyst workflows, which are based on 13.5 million quantum chemistry calculations developed with Nvidia.
The magnet research is aimed at reducing dependence on neodymium and other rare earth elements used in lithography systems, vacuum pumps and precision motion equipment. The department said China currently controls more than 90% of global production of neodymium-based permanent magnets. For batteries, the research will target backup power for semiconductor fabs with solid-state or hybrid storage systems made from more readily available materials. Current backup systems often depend on lithium, cobalt and related materials sourced through overseas supply chains.
The $500 million award extends SandboxAQ’s existing materials science work, one of several business areas that also include cybersecurity, life sciences and quantum sensing. The company was spun out of Alphabet in 2022 and was valued at $5.75 billion after its latest funding round in April 2025. The company has raised more than $1 billion from investors to date.
