Normally I would look past headlines like this without a pause, but with the recent purchase of ATI by AMD, I no longer think these people are completely nuts.  And the AMD/ATI rumor started in a fashion VERY similar to this…remember our post just towards the end of May from a Forbes analyst?  At first, no one really believed the story there, but it quickly grew and we saw it officially announced just a few weeks later

There is a thread in our forums talking about this possible purchase / merger right now!

Reuters has the full information here:

Investors have been speculating that Nvidia might be acquired since July, when Advanced Micro Devices Inc. (AMD.N: Quote, Profile, Research) agreed to buy Nvidia rival ATI Technologies Inc. (ATYT.OQ: Quote, Profile, Research) for $5.4 billion. Rumors of such a transaction resurfaced on Wednesday, spreading quickly across Wall Street trading desks, according to three options market participants.

“There is speculation that Intel will make an acquisition announcement tonight,” said Bill Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.

Investors bought up call options contracts, hoping to profit from a surge in Nvidia shares if the company is acquired at a premium to its current share price.

Before noon more than 33,500 Nvidia calls were traded in the U.S. options market, more than twice their normal volume over the last 20 trading days, according to market research firm Track Data.

Some observers said that they doubt Intel would buy Nvidia because it’s too expensive. The company has a stock market capitalization of about $10 billion, which means it would demand a far higher price than what AMD is paying for ATI.

AMD’s purchase of ATI allows the Intel rival to enter a new market as it currently doesn’t make graphics chips.

An Intel acquisition of Nvidia wouldn’t have that appeal because Intel already sells graphics chips, an area where it has been expanding by hiring engineers specialized in that field, said Pacific Growth Equities analyst Satya Chillara. Additionally, Nvidia Chief Executive Jen-Hsun Huang isn’t ready to hand over control of the company, Chillara said.

“There are psychological, emotional and financial variables at play,” he added.