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Set Instant Pot to "Sauté" setting. Cook bacon, stirring occasionally, until crisp, 10 to 12 minutes. Using a slotted spoon, transfer bacon to a plate, leaving fat in pot. Add onion and cook, stirring occasionally, until softened, 5 to 7 minutes. Stir in flour, garlic, and thyme and cook, stirring occasionally, until fragrant, 1 minute more. Pour in broth and stir until flour is dissolved, about 30 seconds.
Add potatoes, half-and-half, 1 ½ teaspoons salt, and ¼ teaspoon pepper and stir to combine. Cover pot, then set to Pressure Cook on High and set timer for 8 minutes. Slow release pressure.
Uncover pot and stir in sour cream. Using an immersion blender, blend until some chunky bits of potato remain. Alternatively, you can use a standard blender to blend about half of soup and return to pot.
Divide soup among bowls. Top with more sour cream, bacon, cheddar, and chives.