Well first of all there are a couple reasons gnomes are good alchemists.
First of all they are usually good bombers more then anything, making best use of the alchemist bomb ability the class gets.
Specifically the gnome alternate racial trait pyromania accellerates your damage increase for fire based bombs, and the favored class bonus of extra bombs per day is also nice. check it out here
Also, if you are playing a bomber, your size and strength dont matter, bombs are the same damage die regardless of your size and strength doesnt matter for bombs, so you get the ac and to hit bonus from small size, without really taking a hit for your strength penalty.