Nanotechnology enhances CPU performance by enabling the fabrication of transistors at the nanometer scale. These smaller transistors switch on and off faster, which increases the overall speed of the CPU. Additionally, smaller transistors consume less power, making the CPU more energy-efficient. Innovations like FinFET (Fin Field-Effect Transistor) and GAAFET (Gate-All-Around FET) have been made possible through nanotechnology, leading to significant performance improvements.