I've also heard it was designed to wound, but that conflicts with the "devistating" tumbling characteristics it had when under rifled. (1:12 in the original, now usually between 1:9 or 1:7, so that effect is gone)
It was also designed for it's light weight, flat trajectory, and lack of recoil. Most of this was our military switching to full auto assult rifle from the .30 cal battle rifles (M1, M14). Basically, easier to shoot full auto, and you can cary more ammo for spray and pray. It was a McNamara thing, so who knows what the decisions were based on.
I love my AR-15, but would much rather our guys had M-14s or AR-10s in combat.
In the late 50s to mid 60s there was a movement to de-emphasize induvidual acurracy (they assumed that city boys couldn't shoot straight), and try to put multiple rounds downrange in as short a time as possible, to get a sort of "shotgun" effect from a small caliber rifled barrel.
The best of these designs was the SPIW as designed by H&R, which shot sub caliber flechettes from a .22 cal barrel, with a 30mm grenade launcher which besides grenades also fired ammo similar to the 12 ga rounds available now holding 50+ flechettes.
There were problems moving into the production phase as we were increasing our invovement in Vietnam, and Colt/AR had more pressure on certain members of congress & the military procurement system, so the M16 (which was designed as an Air Force survival weapon) was adopted by the Army & the SPIW program was shelved.
Actually it was a JFK thing, he loved the little Poodle Shooter! (Jeff Cooper's term, not mine)