According to an article posted on the CustomPC website which quotes AMD’s head of developer relations, Richard Huddy, AMD has contemplated the purchase of AGEIA, multiple times. There is no discussion regarding what AMD's plans for AGEIA's technology would be, i.e. would it be incorporated into an ATI GPU or a CPU, but the potential for a purchase is real - especially since Intel bought rival Havok.
"AMD has admitted that it’s considering buying Ageia, if the price is right. AMD’s head of developer relations, Richard Huddy, told Custom PC that ‘we’ve had that discussion, yes. It’s a discussion that goes round every three months – someone turns to me and says ‘why don’t we buy Ageia?’ and I go through the arguments about why we should and why we shouldn’t.'"
Although AMD has recently received some large investments that put some much needed cash back in the company's bank accounts, dropping $100 million dollars (potentially) on AGEIA would definitely be a stretch at this time. Plus, with the proliferation of quad-core processors, the usefulness of a dedicated physics processor is still in question.