ARS Technica reports rumors indicate that Sony's next-generation PlayStation (codenamed Orbis) will use a x86 processor and a Southern Islands GPU, both from AMD, while Microsoft's next-generation Xbox (codenamed Durango) is also said to feature a Southern Islands variant (or equivalent to a Radeon HD 6670) but with a PowerPC CPU.
At launch, both the Xbox 360 and PlayStation 3 offered amazing theoretical CPU performance that was significantly higher than that of contemporary PC processors plus GPU performance that went toe-to-toe with discrete graphics cards costing as much as the consoles themselves. If the rumor mill is right, the next generation of consoles will be a lot more modest, and incapable of taking on even today's high-end PCs.
While bad news for NVIDIA, it's probably worse news still for another demographic: current PlayStation 3 owners. The radical shift in architecture, from Cell with NVIDIA graphics to x86 with AMD graphics, means that the next generation PlayStation is unlikely to offer backwards compatibility with existing titles (rumors are already pointing towards Sony removing this feature, in fact). Emulating Cell on the CPU will be impossible, as the CPU simply won't be fast enough.
Console gamers of all kinds may also be disappointed the new machines won't be as tremendous a leap over current systems as past systems have been. Consoles have already been eclipsed by PCs—with a result that games like Battlefield 3 offer PC players larger maps with more players than the consoles can cope with—and it looks like that will still be the case come the eighth generation.