This issue seems to be tied to the display powersaving tech that Intel has called Panel Self Refresh, which may cause the display panel to not update in certain situations (though it's not good at figuring out what those situations are) to reduce power.
I've fixed it on my SP7 i5/8G/256G by installing the Intel Graphics Command Center from the Microsoft Store, opening it, going to System>Power>Panel Self Refresh and turning it off for both "On Battery" and "Plugged In".
I have an SP7 i5/8G/128G, bought 4 weeks ago. It had this problem out of the box. Eventually I tried Microsoft helpline. They revamped drivers and stuff for an hour or two. But no fix. Then I followed this suggestion.
That was 5 days ago: no recurrence of the problem. Seems to me that this solution should be widely publicised...including to Microsoft staff.
Hopefully this is monitored by Microsoft staff...
I have a theory which if correct, would be a design flaw.
Something like this: The display backlight driver circuit creates RF interference, especially when not at full brightness or when changing intensity. This interference can cause issues and sometimes may cause the display to freeze. I have the problem less
when I turn off the adaptive backlight intensity, but it still happens often enough to be a problem.
I suspect that when powering from AC, the backlight driver circuit behaves differently (different input voltage, power path, or something) which allows it to work without failing.
I've just tried the fix suggested above and will monitor this to see if it still occurs. But if it's related to the backlight driver creating interference, Microsoft should be able to come up with a hardware fix, or possibly even software if they can change
the frequency of the drive signal.
(Sorry for the nerdiness - I'm an electrical engineer and just retired a few weeks ago, and it's hard to completely let go...)