MSFT and AMZN both look cheap. Only one of them actually is.

Seems like many look for big tech at reasonable price-to-earnings multiples. Two names kept showing up, both below the market average. Both spending heavily on AI infrastructure. The cash flow story is where they split: **MSFT** **at 23x earnings sounds like value, but the company is spending about 90B on capex this year and most of its operating cash goes right back to expenditures**. **AMZN: Record margins in Q1, 28x trailing earnings. Free cash flow went negative in the first quarter. The stock is near 5-year PE lows.** The thing I keep thinking about: these two sit in the same screen at similar multiples, but one is still generating positive free cash (barely) and the other is burning cash at a rate that would have been unthinkable two years ago. You could price them as a similar trade because the PE multiples look similar, but the underlying capital allocation picture could not be more different. I don't know whether the AI capex pays off. If it does, these multiples age well. If it becomes perpetual maintenance spending, the earnings number that the PE is built on has a real problem.