US government invests 500M in SandboxAQ for AI driven chip materials

The Trump administration will become a shareholder in SandboxAQ and award it $500 million to develop chemicals and materials for American chip plants, according to the Commerce Department’s announcement on Wednesday.

The work includes substitutes for PFAS compounds and rare earth inputs bought overseas, while the package comes from President Donald Trump’s use of research money under the CHIPS Act.

Earlier awards sent $150 million into semiconductor production tools and $2 billion into quantum computing. SandboxAQ was valued at $5.75 billion in April 2025 and has raised more than $1 billion. Nvidia (NASDAQ: NVDA) backs the private company.

SandboxAQ uses physics data to build materials that chip factories can use

SandboxAQ is creating AI for scientific problems in the physical world. Its models are not trained with human writing or software code. They learn from laboratory results, measurements, and physics data. Scientists can use those models on questions that normal chatbots handle poorly.

The company had already adopted such a method in designing biotechnologies and quantum navigation devices that can operate without using GPS. The current federal contract involves the use of this technique in the field of semiconductors.

The US Commerce Department wants products that can reach the market where U.S. chipmakers face shortages, bottlenecks, or risky dependence on foreign suppliers.

The assignment covers four areas. SandboxAQ will seek replacements and improvements for PFAS substances used during semiconductor production. PFAS are often called forever chemicals because they remain in the environment for decades.

The startup will also search for catalysts that speed up chemical reactions during chip fabrication. Separate work will cover permanent magnets and batteries for manufacturing machinery that avoids rare earth elements from China or other foreign markets.

Commerce will receive a minority stake through the arrangement. SandboxAQ chief executive Jack Hidary did not disclose how much of the company the government will own. Jack said the shares carry no voting rights and federal officials will not receive a board seat.

Commerce leaves approved Chinese technology firms off its trade blacklist

The Trump administration has delayed trade restrictions against Chinese technology businesses. Two sources said DeepSeek, memory chip producer CXMT, and more than 100 other companies were marked as national security threats but had not joined the Commerce Department’s Entity List.

DeepSeek, CXMT, and other firms cleared an interagency review last year. The number of companies waiting was previously undisclosed.

One source allegedly said at least 75 Chinese entities tied to advanced chip production, semiconductor manufacturing machinery, and AI model creation had passed the review and were meant to face blacklisting.

Officials from Commerce, Defense, Energy, and State sit on the committee that decides whether a company qualifies for the list. Treasury sometimes joins the process. The first two sources said the panel approved names that Commerce never formally published.

The Bureau of Industry and Security said it uses “many policy and enforcement tools, including the Entity List … on a daily basis to ensure we are combating bad actors.”

China’s foreign ministry told Washington to stop “politicizing, instrumentalizing, and weaponizing” matters involving economics, commerce, and technology.

Spokesperson Lin Jian said, “China has consistently opposed the U.S.’s broad interpretation of the concept of national security and its abuse of export control measures, such as the Entity List, to contain and suppress Chinese enterprises.”

Washington and Beijing remain locked in disputes over trade, technology, and security. The United States uses tariffs and export limits against China. Beijing controls much of the rare earth supply needed by semiconductor producers, automakers, and defense companies.

Since late 2025, Jeffrey Kessler, under secretary of commerce for industry and security, has tried to prevent new Chinese names from being published because of concern about worsening relations, several sources said.

Critics say the delays fit a wider problem at BIS, where officials have struggled to release new controls or act against risks that export restrictions could reduce. Early last year, the agency promised to replace a Biden-era regulation covering worldwide access to AI chips made with U.S. technology.

There has been no issuance of that replacement, and BIS is not enforcing that regulation anymore. It could have helped those covered entities target Chinese companies even outside the Chinese territory, although Entity List cases that have been approved have not been published yet.

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