Vertical Semiconductor was awarded $73 million in CHIPS Act funding to develop its vGaN transistor technology, with the Department of Commerce taking a minority stake.

Vertical Semiconductor has signed a Letter of Intent with the US Department of Commerce to receive up to $73 million in CHIPS and Science Act funding.

The capital will be used to support the development and US-based production of vertical gallium nitride (vGaN) power transistors and to "strengthen US leadership" in AI power infrastructure and high-performance computing. Under the terms of the funding agreement, the Department of Commerce will receive a minority, non-controlling, and non-voting equity stake in the company.

Gallium nitride (GaN) is a wide-bandgap material that can handle higher amounts of power than silicon, meaning GaN-based chips can be more efficient and durable than their silicon counterparts. Traditional GaN is built laterally on silicon or sapphire substrates. Vertical GaN semiconductors, by contrast, have a 3D structure that enables them to conduct electricity vertically through the GaN substrate. This allows current to flow through the chip rather than across its surface, so a device's voltage capacity can be increased without also increasing its physical footprint.

In a statement, Vertical Semiconductor said that, in collaboration with commercial partners, its vGaN R&D efforts will result in "a first-of-its-kind 2.5MW AI rack." The rack is designed to reduce energy losses by 30 percent, shrink physical footprint by 50 percent, and "convert previously wasted electricity into compute capacity." The project will also allow the company to deploy its vGaN transistors across the full AI data center power chain, improving performance at both the grid and compute levels.

"Power is the most significant bottleneck in the build-out of AI infrastructure," said Cynthia Liao, CEO and co-founder of Vertical Semiconductor. "The CHIPS R&D award will accelerate Vertical Semiconductor's R&D and commercialization initiatives for vertical Gallium Nitride, which will expand American compute capacity within existing power constraints."

Bill Frauenhofer, executive director of semiconductor investment and innovation at the Department of Commerce, added: "These CHIPS R&D awards will support breakthroughs in power semiconductor devices and critical materials. Accelerating domestic R&D across these technologies will strengthen America's ability to convert and deliver power for the grid, advanced data centers, defense systems, and emerging fusion energy."

Co-founded by Liao, Josh Perozek, and Tomas Palacios in 2024, Vertical Semiconductor is an MIT spin-out based on research undertaken by MIT's Palacios Group, a "world-leading" GaN research lab.

In October 2025, the company raised $11 million in a seed funding round led by Playground Global, with participation from JIMCO Technology Ventures, Milemark Capital, and Shin-Etsu Chemical.