Investors are watching for the next potential takeout target in the tech space, FBR Capital Markets Semiconductor Analyst Chris Rolland said Thursday.

The race to find the next hot company has heated up after Infineon Technology's acquisition of chip maker International Rectifier for $3 billion.

On CNBC's "Fast Money," Rolland said that many semiconductor companies are dealing with a game of scale when it comes to facility size and machinery.

Companies with excess space will acquire smaller companies that have reached maximum capacity in order to fill their facilities and give the new company a fresh start to improve margins, he said.

"If you have a ton of state-of-the-art capacity available and you're a player like Infineon, you go out and you buy outdated manufacturing capacity like Atmel's," said Rolland. "You bring them in-house, give them an entirely new cost structure, cut management, cut the redundant sales force — and all of a sudden you pop that model and you pop margins."

Atmel is a maker of microcontrollers used in touch-screen interfaces on smartphones and other touch-screen devices.

Rolland's two other picks include Fairchild Semiconductor and ON Semiconductor, both power-management semiconductor companies.

—By CNBC's Leanne Miller