The Inquirer learned at CES 2007 that AMD was really close to acquiring NVIDIA last year, but decided to go for ATI for an unknown reason:
AMD was looking to buy either Nvidia or ATI since late 2005 and finally made the decision to acquire ATI very early in Q2 2006. It was one of the best-guarded secrets to date. It also became the largest semiconductor takeover ever.
We haven't yet learned specifically why AMD finally went with ATI but Nvidia would have been a good choice as well, as it makes a good chipset, something that AMD desperately needed.