Trying to Login with DOMAIN\USERNAME but getting error “Login failed for user ‘DOMAIN\MACHINENAME$'”

There are two servers, one is app and one is Db both hosted on AWS separate EC2. App server have an IIS and logged in with service account to communicate with DB server. Application is using Trusted_Connection option in connection string so that not have to specify credentials and communicate as logged in user. While communicating App server hits with below error, IIS app was configured with default AppPoolIdentity –

System.Data.SqlClient.SqlException: Login failed for user ‘DOMAIN\MACHINENAME$’.

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