According to an interview with Gamespot, Nvidia did not want to get involved with Sony and having their graphics chips in the upcoming PS4, due to Sony not wanting to pay what Nvidia wanted, here are a couple of quotes from Tony Tamasi, Senior VP of content and technology at Nvidia:
I’m sure there was a negotiation that went on and we came to the conclusion that we didn’t want to do the business at the price those guys were willing to pay.
Having been through the original Xbox and PS3, we understand the economics of [console development] and the tradeoffs.
We’re building a whole bunch of stuff and we had to look at console business as an opportunity cost. If we say, did a console, what other piece of our business would we put on hold to chase after that?
Read more at the source:
PS4 not worth the cost, says Nvidia