Who didn't really see this one coming?
From the inception of the Aegia PhysX add-in card, I thought, "Hey, that's a neat idea." Too bad there's only two graphics card companies that fully dominate the market for this product. It was only a matter of time before ATi (before they were acquired by AMD) or NVIDIA scooped them up and featured their technology on upcoming cards.
A quick refresh for you, Ageia PhysX is both a separate processor (on an add-in card, called PPU) and SDK created with the idea that developers could have a standard in-game physics system, instead of spending money on building a new one or buying someone else's.
So, like all the 3rd-party candidates before them in this two-party GPU system, Ageia managed to raise some important questions and bring them to the limelight, but we all know they never had a shot at domination. With how fast chip-dies shrink, or have shrunk since the PhysX PPU was released, did they really expect for NVIDIA and ATi to say, "Fiddle-sticks, lookit what they're doing over there." and never integrate their own physics processing? With SLi, CrossFire, X2 GPUs and with dual-core CPUs in the mainstream, quad-core CPUs on the horizon, it was only a matter of time before a separate add-in card simply became an unnecessary expense.
While the landscape of PC gaming doesn't change much with this announcement, NVIDIA acquires sweet delicious intellectual properties that both make NVIDIA itself an even juicer target for acquisition and increase its lead over AMD. If Intel could throw out a Microsoft-to-Yahoo style proposal, that would be the killing blow for AMD and posbbily PC gaming all together.
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NVIDIA's very modest press release ]
Also, not many games used the physX, so it was hard to justify it.