Press SAUTE in instant pot.
Pour milk, water, sugar and cocoa powder and cook until milk comes to a boil. Keep stirring frequenctly.
Add chocolate chips and vanilla extract and cook until thy dissolve and the hot chocolate is creamy.
You can serve this Hot Chocolate with Marshmallows like I did. You can add some whipped cream on top and sprinkle a little cocoa powder. You can also top it off with White, Dark or Milk Chocolate Chips, Sprinkles, Cocoa Puff Cereal, Coconut Shavings, Roasted Peanuts.