Stock Splits: How AI Influences Market Peaks

While artificial intelligence (AI) has undeniably impacted the impressive highs of the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite, stock-split excitement has also played a significant role in boosting key businesses within these indexes.

A stock split is a method that publicly traded companies can use to adjust their share price and share count equally. Although these changes are a cosmetic alteration, they do not affect the company’s overall market capitalization or operational performance.

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Since Walmart initiated stock-split enthusiasm in late February, over a dozen well-known companies have undertaken this approach, mostly through forward stock splits. These splits aim to make shares more affordable for retail investors, generally undertaken by companies with a strong history of growth and innovation.

Investors often seek the next major company likely to announce a split, as stocks that have split previously often outperform the benchmark S&P 500. Although nothing is definite, here are three major stocks expected to split in 2025 based on their solid market positions.

Meta Platforms

The first notable company that may split its shares next year is leading social media firm Meta Platforms (NASDAQ: META). Since going public in 2012, Meta is the only member of the “Magnificent Seven” that has yet to conduct a stock split. With shares briefly surpassing $600 in October, the conditions could prompt action from Meta’s board.

Several factors contribute to Meta’s strong performance. Primarily, it attracts more daily active users than any other social media network. As of the last quarter, its platforms, including Facebook, Instagram, WhatsApp, and others, averaged about 3.29 billion daily users. This extensive reach gives Meta exceptional pricing power in the advertising market.

Moreover, ad-driven business models, like Meta’s—which relies heavily on advertising for around 98% of its revenue—thrive even during economic downturns. Since most recessions since World War II have been short-lived, businesses usually increase marketing spending during prolonged economic growth.

Meta’s financial strength is evident with $70.9 billion in cash, cash equivalents, and marketable securities as of September. Its net cash from operations reached $63.3 billion in the first nine months of 2024, giving CEO Mark Zuckerberg the flexibility to invest in ambitious projects like AI development and the metaverse.

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Netflix

The second strong contender for a stock split is streaming giant Netflix (NASDAQ: NFLX). Since its IPO in May 2002, Netflix has executed two splits: a 2-for-1 split in February 2004 and a 7-for-1 split in July 2015. As shares approached $871 at the market close on November 19, they were nearing the price before its last split.

Netflix’s position in the streaming market gives it unique advantages. Unlike traditional media outfits like Paramount Global and Walt Disney—who face challenges due to decreased cable subscriptions—Netflix has consistently turned a profit. As of September, it reported 282.7 million global streaming subscribers.

Netflix also benefits from strong pricing power. As a leader in original content with one of the largest libraries, Netflix can charge premium subscription rates. Efforts to limit password sharing have also helped improve profit margins.

Furthermore, its subscription-based model enables better stability during economic slumps. Subscribers are less likely to cancel during temporary downturns, compared to businesses that might reduce marketing spend. Improved cash flow, now consistently generating excess, allows Netflix to invest in more original content and issue shares buybacks to enhance shareholder value.

Costco Wholesale

Lastly, Costco Wholesale (NASDAQ: COST) stands out as another stock that may lead to a forward split in 2025. Although Costco has already completed three forward splits since its public listing, its last split occurred back in January 2000. With shares exceeding $930 on November 19, a split seems imminent to make them more accessible for everyday investors.

Costco’s size provides it with a competitive advantage, enabling bulk purchases that lower costs per item. This strategy allows Costco to offer prices that undercut smaller stores and national grocery chains alike. The value proposition appeals to budget-conscious consumers, making Costco a favored choice among shoppers.