OK! EXCLUSIVE: Cameron vs. Kate — It's War!

Cameron Diaz and New York Yankee Alex Rodriguez are flaunting their romance — and breaking the heart of Alex's ex Kate Hudson.

OK! GALLERY: KATE & A-ROD SPEND THE NIGHT AT NINE

Cameron and Alex were recently spotted dining at NYC's Macao Trading Company and Hotel Griffou. And photographers caught Cameron leaving Alex's apartment early in the morning on May 2.

It's all sad news for Kate, 31, who was "mortified" when she heard about Alex, 34, and Cameron, 37, a source tells OK!. "She's desperate to get back together with Alex," the source says, "and finds it humiliating that he's chosen Cameron. She really likes Cameron, but she's always felt a bit competitive with her."

OK! EXCLUSIVE: CAMERON DIAZ & A-ROD — HOT 'N' HEAVY ALREADY!

Another source tells OK!, "Kate is really bummed about A-Rod. She was completely blindsided when he blew her off." In fact, some are calling Kate's post-breakup rumored boob job "consolation implants."

"She just thought he wanted to be single and sow his wild oats, but then she found out he was hanging with Cameron," says the source. "It was like a knife through her heart."