NVIDIA hasn't officially announced their plans for AGEIA yet but according to X-bit Labs the PhysX cards will definitely survive, at least for some time.
AGEIA's vice president even said in an interview that more PhysX cards are in the works.
Nvidia has a long history of acquisitions with completely different outcomes for the companies being taken over. For example, when it acquired 3dfx, it ceased to sell Voodoo graphics cards almost immediately and there was barely any support for 3dfx graphics cards going forward. On the other hand, when Nvidia took over mobile chip developer MediaQ, it re-branded certain products and continued their sales and support. After Nvidia promised to deliver “GeForce-accelerated PhysX” as soon as possible, the future of Ageia-developed physics chips became completely indistinct.
Despite being on the market for a little less than two years, Ageia PhysX has not become popular among gamers. However, many gamers are well-aware of dedicated physics processing units (PPUs). Moreover, considering the fact that Ageia PhysX is already here and its successor is supposedly ready, it would be easier for Nvidia to promote dedicated physics hardware in order to promote higher quality physics in video games in general first and only then halt support for PPUs and focus on GPU-accelerated physics.
“We are still committed to hardware-accelerated physics and will support existing PPU customer commitments, as well as future business, as demand dictates. As long as there is demand, Nvidia will do what’s right to support [dedicated PhysX PPUs],” said Michael Steele, vice president of marketing at Ageia, in an interview with X-bit labs.