3 Reasons Alphabet Is the Most Underrated "Magnificent Seven" Stock

The Magnificent Seven are the most scrutinized stocks on the market, so calling any of them underrated feels strange. Yet Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) fits the description. Even after posting 24% revenue growth and blistering cloud numbers, the market keeps treating it like a threatened ad company rather than the artificial intelligence powerhouse it has become. Here are three reasons it is the most underrated of the group.

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1. It is the cheapest Magnificent Seven stock, and shouldn't be

Start with the disconnect. Alphabet trades at roughly 17 times forward earnings, the lowest valuation in the entire Magnificent Seven, despite growing faster than most of them. In its most recent quarter, revenue climbed 24% to nearly $120 billion, operating income rose 30%, and Google Cloud revenue exploded 82%. It has also been the only member of the group to beat the market this year.

A business firing on all cylinders usually commands a premium. Alphabet gets a discount instead, because investors have spent two years worrying that AI would gut its search business. That fear has kept a lid on the stock even as the results say otherwise.

2. AI turned out to be a tailwind, not a killer

The feared narrative was that chatbots would make Google Search obsolete. The opposite is happening. Alphabet's own Gemini models now handle 22 billion queries' worth of tokens per minute, its Gemini app has around 950 million monthly users, and nearly 90% of the Fortune 100 are using its enterprise AI tools. Rather than being disrupted, Alphabet has become one of AI's biggest winners.

Google Cloud is the clearest proof of the booming demand for AI infrastructure and software. And there is a hidden engine here too: Alphabet designs its own AI chips, called TPUs, and has started placing them directly in customers' data centers. That business is small today but is set to ramp significantly in 2027, giving Alphabet a second way to profit from the AI build-out beyond its own products.

3. The market gives it little credit for its hidden assets

This is the part I find most compelling. Buried inside Alphabet are businesses the market barely values. It owns roughly 14% of the AI lab Anthropic, a stake worth well over $100 billion. It owns Waymo, the clear leader in self-driving robotaxis. It owns YouTube, which analysts routinely argue would be worth hundreds of billions as a stand-alone company. And it owns DeepMind, one of the premier AI research labs on Earth.

Add those pieces up, and Alphabet looks even cheaper than its headline multiple suggests. It is telling that Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) recently built a stake worth tens of billions of dollars, a rare vote of confidence from the firm of the world's most famous value investor.

The risk worth naming

I would not pretend Alphabet is flawless. Alphabet's capital spending is exploding, with its 2026 budget raised to $200 billion and warnings that 2027 will climb even higher. That pressures near-term cash flow, which is exactly why the stock dipped after its latest report. Regulators are also circling its search and advertising empire, and the long-term threat of AI reshaping how people find information has not vanished entirely.

Here is the bottom line. Alphabet offers the growth of an AI winner, the valuation of a value stock, and a collection of hidden assets the market largely ignores. That combination is why I think it is the most underrated name in the Magnificent Seven. My honest read is that the fears holding it back are fading while the strengths keep compounding, and that gap tends to close in the patient investor's favor. Buy Alphabet for the whole package, keep an eye on the spending, and let the market catch up to what the numbers are already showing.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Fool has a disclosure policy.