GPUs, not CPUs. Also, the 7970's GPU, the Tahiti, is slightly smaller than the Cayman in the Radeon 6970 which is already much smaller than the GK110 in the GTX 580. The 7970 might have a 384 bit bus like the 580 does, but it is still nowhere near as large as the GK110. Yes, Nvidia's cards are currently cheaper to make than AMD's in the same performance range, but that doesn't mean that AMD would go out of business. In fact, the Tahiti is only something like 20% larger than the GK104. I'd have to check the numbers for a more exact comparison, but it really isn't so much larger that it's unreasonable at all. Like I said, it is smaller than the Cayman, an already small GPU. GK104 is simply even smaller. If anything holds back Radeon 7900 cost-wise, it would probably be the memory chip count rather than the GPU size.
If AMD wanted to, they could probably drop prices a lot farther without going even nearly bankrupt. That AMD has continually been making price drops seems to confirm this whereas nebun seems to have no evidence behind his/her claim.