Cream butter, cream cheese, and peanut butter until mixed (using a hand-held mixer). Mix in vanilla.
Add powdered sugar, ½ cup at a time, and mix until combined. Mix in chocolate chips.
Turn out mixture on a large sheet of waxed paper. Use your hands to form into a rectangle (flag) shape.
Place the waxed paper onto your serving plate. (It helps if the plate has sides…less mess!) Cover in sprinkles in a flag pattern: using waxed paper, block off a section for the blue. Cover in blue sprinkles, then a few white ones and pat to adhere them. Do the same for the red and white stripes of the flag, repeating until the dip is covered.
Serving suggestion: pretzels, animal crackers, cookies, a spoon. Store in refrigerator.