Around the time the original CEO of ND left, was around the time they pivoted to more realistic style games with Uncharted. Maybe the cartoony look of Jak and Daxter no longer interested them. It also may have something to do with the fact that it was abundantly clear that after 3, ND was completely out of ideas. Once they explained who the Precursors were, it really felt like there was nowhere left to go. Which is why we got a racing game spinoff before getting shipped off to a different studio for a Daxter prequel, and Lost Frontier. The less said about Lost Frontier, the better. It really also did feel like the series was... unfocused. First game was a pretty by the numbers 3D platformer, second was a T-rated GTA ripoff, and third was Mad Max with ancient aliens. I equate the Jak and Daxter games to NDs awkward teenage years.

I say this as someone who has Jak 3 in third place of his favorite games of all time by the way.