Intel Corporation (INTC  ) shares are surging following reports that the company qualified for up to $3 billion in federal funding to produce semiconductors for U.S. military applications.

The potential grant, part of the CHIPS and Science Act's Secure Enclave program, aims to secure a domestic supply of advanced chips critical for defense and intelligence purposes.

Intel has been working closely with the U.S. government through various defense programs such as the State-of-the-Art Heterogeneous Integration Prototype (SHIP) and Rapid Assured Microelectronics Prototypes-Commercial (RAMP-C). This latest funding would help expand Intel's capabilities in producing cutting-edge semiconductors across its facilities in Arizona, Ohio and other states.

This comes on top of an already proposed $8.5 billion in grants and $11 billion in loans Intel is negotiating under the broader CHIPS Act, which seeks to revitalize the U.S. semiconductor industry.

Intel also announced it expanded its strategic collaboration with Amazon Web Services (AWS) (AMZN  ) under a multi-year, multi-billion-dollar framework covering product and wafers from Intel.

"This expansion of our long-time relationship with AWS reflects the strength of our process technology and delivers differentiated solutions for customer workloads. Together, our Secure Enclave and AWS announcements demonstrate the continued progress we are making to build a world-class foundry business," said the Intel announcement.

INTC Price Action: Intel shares were up by 6.36% at $20.91 Monday at market close, according to Benzinga Pro.