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Place the sugar, butter, and milk in a small saucepan over medium-low heat and cook, stirring constantly, until the mixture comes to a boil, 3 to 4 minutes.
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Boil, stirring constantly, for 2 minutes.
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Remove the pan from the heat, add the chocolate chips, and stir until they are melted.
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Let the pan rest off the heat to cool slightly but not completely, 3 to 4 minutes.
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Fold in the peanuts and marshmallows until they are well combined and the heat from the frosting begins to melt the marshmallows.
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Turn the frosting out onto the cooled cake, then spread evenly with a spatula until the frosting covers the entire cake.
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Or spread onto cooled cupcakes.