Combine cream cheese, jalapeno peppers, chicken, green onion, bacon bits, and water in a multi-functional pressure cooker (such as Instant Pot®). Close and lock the lid. Select Manual; set timer for 5 minutes. Allow 10 minutes for pressure to build.
Release pressure carefully using the quick-release method according to manufacturer's instructions, about 5 minutes. Unlock and remove the lid. Add Cheddar cheese and sour cream. Stir until cheese is melted.
Transfer dip to a serving dish and garnish with additional jalapenos, bacon bits, and Cheddar cheese if desired.