Wow. Even the highest upvoted answers here are crap.

OP is asking why CPU makers don't simply make gigantic CPUs to increase performance. This idea simply wouldn't scale for more reasons than I care to mention.

Here are a few to think about.

First the trivial ones:

• There is no existing manufacturing process to grow silicon ingots of the size contemplated here.
• Even if we could grow ingots if this size and slice them into "1 square meter" wafers, we do not have fabrication processes to handle wafers of that dimension.

Manufacturing difficulties aside, very quickly economics and physics present problems.

• Defects in Si are a fact of life. These defects are randomly distributed. A frequently used analogy is to shoot a shotgun at a barn door from a distance, than slice the barn door into 1 inch squares. Squares without shotgun holes are "good", squares with holes are defective. The smaller the die you slice your wafer into the higher the yield you can obtain. If you started using gigantic die sizes you would be guaranteed defects in your wafer and your yield would plummet. Sure, you could implement multiple functional units and deactivate the failing ones, but you would end up having to implement absolutely everything on the chip in a redundant manner. Eventually you reach the point where it is more efficient to just switch back to smaller die, package them, and then connect a bunch of good processors together with busses.
• All these transistors would need to communicate with each other. Routing signals is already a gigantic pain in the ass (datapath and synthesized logic are a piece of cake, getting signals all over the chip is where layout engineers spend their time). Now you want to exponentially increase the number of signals being routed and linearly increase the length of those signals? Congestion and capacitance are going to destroy you.
• Even if you could efficiently design and manufacture all these transistors what are you going to do with them? If you can't increase clock rate or the degree of parallelism then you are relying on the CS guys to keep all those functional units busy; and it most cases they can't because code written today is inherently linear (leaving aside specialized things like fluid dynamics and weather modeling).

Source: I studied directly under Flynn and Hennessy, have designed processors for a living, and have been in the computer industry for 34 years.