Sometimes companies choose to split their shares to make their shares more affordable.
A stock split does not change the market value of a company.
Microsoft hasn’t completed a stock split in over two decades.
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As the end of 2025 approaches, it looks like another strong year for the stock market. As of this writing (December 2), S&P 500(SNPINDEX: ^GSPC)and Nasdaq Composite(NASDAQINDEX: ^IXIC)they gained 16% and 21% per year respectively.
In a similar fashion to the past two years, artificial intelligence (AI) stocks have been some of the biggest gainers in the market. Actions of Nvidia and Alphabet outperformed the major indexes, while Apple, Meta platformsand Microsoft(NASDAQ: MSFT) they posted double-digit gains.
Throughout the AI revolution, a number of big tech companies have completed stock splits as their valuations soared into the stratosphere.
Let’s explore how stock splits work and why they are important. From there, I’ll review some of the most notable splits of the AI era and reveal my prediction for why Microsoft could be the first big-name stock split of 2026.
Image source: Getty Images.
When a stock starts to experience a huge run, investors generally tend to see the stock price rally as expensive. While such a notion might be true, the absolute dollar value of a stock’s price reveals little about the company’s underlying valuation.
However, managers of large corporations understand the psychology of investors. So, if they notice that the trading volume is decreasing or that their shares are mainly bought and held by institutional investors, the companies may choose to split their shares.
Microsoft shares are currently trading for $490 and the company has 7.4 billion shares outstanding.
If the company were to complete a 5-for-1 split, for example, Microsoft’s stock price would become $98, and its shares outstanding would amount to about 37 billion. As investors can see, in a stock split, a company’s stock price and number of shares move in the same ratio.
This is important to understand because stock splits do not inherently change a company’s market capitalization. Broadly, companies will engage in a stock split in an effort to broaden their investor base — making the stock more accessible to retail investors who have been sitting on the sidelines.
Additionally, stock splits often attract a lot of discussion from talking heads on financial news programs. With this in mind, division can also act as a subtle form of marketing for a company.
Image source: Getty Images.
Over the past five years, several members of the “Magnificent Seven,” including Nvidia, Alphabet, Amazon and adze they chose to share their stock. More recently, Broadcom and Netflix they also joined some big tech stock splits.
NVDA data by YCharts
As the trends in the chart above illustrate, these stocks experienced sustained share price appreciation prior to their stock split.
Microsoft shares gained 92% during the AI revolution. While that’s an impressive return, the Windows maker outperformed the broader Nasdaq.
The last time Microsoft completed a stock split was in February 2003. Since then, Microsoft shares have gained nearly 2,000%.
MSFT data by YCharts
What’s interesting is that Microsoft stock has been relatively flat for a decade. In the early and mid-2000s, innovation was low at Microsoft, and the company was largely viewed as a dinosaur compared to Apple and other Internet darlings.
While the company’s cloud unit, Azure, has become a formidable player in the AI landscape, it still lags behind in market share compared to Amazon Web Services (AWS). Moreover, even if Microsoft explored designing its own custom chips, the company is unlikely to dethrone Nvidia or Advanced microdevices to the data center accelerator market soon. The latest threat to the chip industry appears to be coming from Alphabet, not Microsoft.
I think part of Microsoft’s problem is that despite all its progress on the AI front, the company is still perceived as an archaic brand by many. Given that several of its cohorts have completed splits in recent years, combined with Microsoft’s respectable but perhaps somewhat pedestrian performance compared to its peers in recent years, I think a stock split could be a mechanism the company is using to rejuvenate investor enthusiasm.
It’s important to note that a potential Microsoft stock split is just a fun prediction on my part. Whether the company actually chooses to split its stock next year is irrelevant. While the competitive landscape is intensifying, Microsoft has still proven to be a solid investment choice among megacap AI stocks in recent years.
I see Microsoft as a compelling long-term buy-and-hold opportunity, and I see the company as a nice complement to existing positions in cloud hyperscalers and chip designers alike.
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Adam Spatacco has positions in Alphabet, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Meta Platforms, Microsoft, Netflix, Nvidia and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long $395 January 2026 Microsoft calls and short $405 January 2026 Microsoft calls. The Motley Fool has a disclosure policy.
Prediction: This will be the first tech company to split in 2026 was originally published by The Motley Fool
