Since Wall Street’s major stock indexes found their respective bottoms in October 2022, they’ve been virtually unstoppable. From Nov. 1, 2022 through the closing bell on Feb. 7, 2025, the ageless Dow Jones Industrial Average, broad-based S&P 500, and growth stock-propelled Nasdaq Composite have respectively gained 36%, 56%, and 79%.
There’s no question that artificial intelligence (AI) has played a big role in this outperformance. Any game-changing technology that presents with a $15.7 trillion addressable market by the end of the decade is bound to draw attention.
But this isn’t the only catalyst responsible for pushing the stock market to new heights.
Among the confluence of factors that have also helped lift stock valuations, such as a decline in the prevailing rate of inflation and Donald Trump’s return to the White House, is investor euphoria surrounding stock splits.
A stock split is an event that allows a publicly traded company to adjust its share price and outstanding share count by the same magnitude. Keep in mind that these changes are purely cosmetic and don’t alter a public company’s market cap or affect its underlying operating performance.
Though stock splits come in two varieties, investors prefer one far more than the other. Reverse splits, which are designed to increase a company’s share price, are the least-desirable of the two. This type of split is usually undertaken by struggling businesses that are attempting to avoid delisting from a major stock exchange.
On the other hand, investors often flock to companies completing forward stock splits. This form of split reduces a company’s nominal share price, which comes in handy for retail investors who aren’t able to purchase fractional shares of stock through their broker.
More importantly, businesses that undertake forward splits are typically outperforming and out-innovating their peers. Based on a study by Bank of America Global Research, companies conducting forward splits have handily outperformed the benchmark S&P 500 in the 12 months following their initial split announcement.
In other words, forward stock splits act like a beacon to alert investors to time-tested businesses that, statistically and historically, are poised to outperform.
Last year, more than a dozen prominent companies completed a stock split, only one of which was of the reverse variety. While a few forward splits have taken place since 2025 began, none have been from high-profile businesses.
