I'm trying to make a castle and this is what I have so far:

That's comprised of 2 objects, the top and bottom. I selected both of them and added a uv unwrap. I then unwrapped both of them together and this is the template:
http://i.imgur.com/tqtbvBl.png?1?5563
I couldn't find a way to make an AO map for both of them together, so I made an AO map for each of the two parts seperately then joined them together in photoshop. I used render to texture and a skylight to do it. This is the AO map:

After applying the above AO map to my objects, I get blue artifacts although they're very small. I wanted my object to be dark grey so I made a new layer as can be seen here:
http://i.imgur.com/WZ6Mmzh.png
I put the AO map on the top of the layer hierarchy and set it to multiply. This is what they look like together:
http://i.imgur.com/fHG1tTa.png . As you can see it looks fine in photoshop but as soon as I import it into 3DS Max and apply it to my object I get blue artifacts which can be seen here:

and here:
http://i.imgur.com/eFXu4O2.png?1 .
This is the second time this has happened with the last time being the last model I've worked on. I've decided to abandon it because I've lost hope but since it reoccured I don't think I can ignore it any longer which is why I've decided to just ask you guys.
Replies
Customize > Preferences... > Viewports tab > Configure Driver
Under "Download Texture Size," check "Match Bitmap Size as Closely as Possible"
Reload your bitmap file
I don't really use Max so I don't know if there's a solution to your problem while using the Nitrous drivers, or if the issue is specific to hardware or driver versions.
You don't have Max's viewport AO turned on do you? That's always really grainy for me... looks a bit different than your screnshot tho.
Worked! Thanks a lot! Thanks for all your answers guys.
rendering>gamma lut setup/ disable it.
Also, don't use openGL driver, it's way slower than direct3d (though it doesn't display that gamma correction i guess)