They were trying to compete with Sun and IBM in the server space (SPARC and Power) and thought that they needed a totally pro architecture (which Itanium was). The baggage of 32-bit x86 would have just slowed it all down. However having an x86-64 would have confused customers in the middle.

Think back then it was all about massive databases - that was where the big money was and x86 wasn't really setup for the top end load patterns of databases (or OLAP data lakes).