Although the “Magnificent Seven” are the most closely watched stocks in the market, one among them continues to be viewed through a traditional lens by investors. Even after reporting 24% revenue growth and impressive cloud-computing figures, Alphabet (GOOGL) (GOOG) is still treated by the market as an advertising company facing headwinds, rather than the AI leader it has become. The following three reasons demonstrate why it is the most undervalued stock in the Magnificent Seven.
The most direct evidence lies in the valuation disconnect. Alphabet currently trades at a forward price-to-earnings ratio of roughly 17 times, the lowest among the Magnificent Seven, yet its growth rate exceeds that of most of its peers. In the most recent quarter, the company posted 24% revenue growth to nearly $120 billion, a 30% increase in operating income, and an 82% surge in Google Cloud revenue. At the same time, Alphabet is the only member of the Magnificent Seven to outperform the broader market this year. By all conventional logic, such broad-based operational strength should command a valuation premium, but Alphabet instead trades at a discount. The reason is that investors have spent the past two years worrying that AI might disrupt its core search business, and that anxiety has suppressed the stock price, even as actual results have proven otherwise.
The market previously feared that chatbots would make Google Search obsolete, but the opposite has occurred. Alphabet’s own Gemini model now processes up to 22 billion query tokens per minute, its Gemini app has roughly 950 million monthly active users, and nearly 90% of Fortune 100 companies are using its enterprise AI tools. Far from being disrupted, Alphabet has emerged as one of the biggest winners in the AI wave. The explosive growth of Google Cloud clearly reflects strong market demand for AI infrastructure and software. Moreover, Alphabet holds a hidden advantage: the company designs its own AI chips, known as TPUs, and has begun deploying them directly in customer data centers. This business remains small in scale today, but it is expected to expand significantly by 2027, opening a second channel for Alphabet to profit from AI buildout beyond its own products.
Within Alphabet, there are also several major assets that the market has scarcely valued. The company holds approximately a 14% stake in AI lab Anthropic, with that equity position worth well over $100 billion. It owns Waymo, the clear leader in autonomous ride-hailing. It also owns YouTube, which analysts frequently note could be valued at hundreds of billions of dollars if spun off independently. In addition, the company boasts DeepMind, one of the world’s premier AI research laboratories. Once these assets are fully recognized and priced by the market, they could become a powerful force driving a revaluation of Alphabet.
In summary, Alphabet possesses the lowest valuation among the Magnificent Seven while demonstrating strong growth momentum; AI has not weakened its core business but has instead become a major driver; and the company holds a substantial portfolio of hidden assets that have yet to be fully priced in by the market. These three factors together indicate that Alphabet is the stock most deserving of a fresh review and reassessment among the Magnificent Seven today.
