14 DAY TRIAL // As weird as it may seem, AMD wanted to buy a graphics company and that didn't necessarily spell "Ati". In the winter of 2005 AMD was looking to buy either Nvidia or Ati and the final decision didn't come until in the 2nd quarter of 2006. At that moment, the acquisition was one of the best-kept secrets ever, motive for which the largest IT takeover in history was a complete success.
There is no information regarding why AMD wanted Nvidia and how they ended up with Ati. Instead, from legitimate sources I can point out some of the reasons that stood behind the integration of Ati.
At first, you must understand that AMD wanted to control a big chunk of the graphics business and not because they wanted to enter the gaming business, but because they saw what a GPGPU graphic chip could do and they thought about developing future stream processors based on GPU designs.
Moreover, Ati does not stand for graphics alone. It also means TV cards, HTPC, entertainment centers and a lot more money making businesses. And everyone likes to make a good buck every now and then. But probably the most important motive was that AMD needed the experience of a high-end graphics maker in order to fully develop its Fusion CPU/GPU architecture. And Ati's GPUs had a lot of computational power that could be put to good use.
Nvidia recently unveiled its GPGPU architecture too, but they still lack a competitor for Ati/AMD's Stream Processor. As for Fusion, we'll just have to wait and see if 2008 will indeed bring the first hybrid CPU/GPU solution. Until then, we can't say for sure if AMD's decision was wise or not.