The artificial-intelligence trade is upending the long-standing pecking order of Big Tech valuations as investors hunt for the next big winners and losers.

Microsoft's stock $(MSFT)$ has historically been more expensive than Alphabet's $(GOOGL)$ $(GOOG)$ by one widely followed measure, but that's no longer the case after Alphabet's impressive stock run-up over the last year. Shares of Microsoft are trading at a rare and widening discount to Alphabet's on a forward price-to-earnings basis, Broyhill Asset Management Chief Investment Officer Chris Pavese pointed out in a post on X Wednesday.

Microsoft's forward P/E ratio currently stands at 22.1x, while Alphabet's multiple has climbed to 26.0x, according to Dow Jones Market Data.

Alphabet's valuation officially surpassed Microsoft's on Dec. 30 last year, and the disparity has only increased as Microsoft has seen $357 billion in market capitalization get wiped out following a disappointing fourth-quarter earnings report at the end of January. The disparity between the two names reached its most extreme point in 10 years on Feb. 3, when Microsoft's stock traded at a staggering 6.8-point discount to Alphabet's.

It's a drastic change for Microsoft, whose shares commanded a 15-point premium to Alphabet's as recently as June of last year. Investors have historically been willing to pay more for Microsoft's suite of sticky enterprise-software offerings and its Azure cloud platform, which is significantly larger than Alphabet's Google Cloud platform.

However, shares of Microsoft have been hit hard by the unrelenting and apparently indiscriminate selloff of software stocks this year amid AI fears, and as Azure growth levels fell short of what investors wanted to see last quarter.

Microsoft's stock is down 17% year to date, making it the worst performer among the group of megacap tech stocks known as the Magnificent Seven.

Meanwhile, Alphabet's full-stack AI strategy - from its custom tensor processing units to its Gemini frontier model - has impressed investors looking for a seemingly lower-risk way to play the AI trade.

Alphabet's valuation has also climbed ahead of Meta Platforms' (META) in recent months. Meta and Alphabet shares have traded at similar valuations over the past decade, with 10-year forward P/E averages of 23.0x and 23.2x, respectively. But Alphabet shares have definitively pulled forward, with its P/E ratio currently 4.6 points higher than Meta's, according to FactSet.

Whether these recent valuation changes are a temporary deviation or a regime shift among Big Tech companies remains to be seen, especially as investors wonder if software stocks will undergo a permanent re-rating in a post-AI world.

The software selloff and the shakeup among the Magnificent Seven is a clear sign that investors are treating the AI trade as a "zero-sum game," Bob Savage, head of markets macro strategy at BNY, told MarketWatch.

"Zero-sum-game thinking is really just another word for rotation trade," Savage added. In this case, investors appear to be rotating out of Meta and Microsoft and into Alphabet.