Stock splits are a common corporate action wherein a company increases the number of its shares while proportionally reducing the stock price. The company’s market capitalization remains unchanged, but shareholders end up with more shares. For example, in a 2-for-1 stock split, every existing share is divided into two, and shareholders receive an additional share for each one they hold, while the price per share is halved. Although this may seem like a simple adjustment, stock splits can have far-reaching consequences for investors, particularly when viewed in light of market psychology, stock dilution, and potential for manipulation. Stock splits can appear attractive to investors because they make high-priced stocks more affordable. For example, Alphabet’s 20-for-1 stock split reduced its share price from approximately $2,200 to around $113. Retail investors often find these splits enticing, as they can now buy shares at a lower price, and historically, stock splits have been associated with a temporary rise in a company’s stock price. However, experts remind investors that stock splits do not change the company’s fundamentals—its market capitalization remains the same, and its performance is unaffected by the split itself.

What are Stock Splits?
A stock split multiplies the number of shares available while reducing the price per share proportionally. For instance, if a company announces a 20-for-1 split, as Alphabet did, an investor who held one share worth $2,200 now owns 20 shares, each worth $110. This activity is mainly psychological, making the stock more accessible to retail investors but doing nothing to change the company’s value or performance trajectory.

Investor Sentiment and Speculation
Investors often view stock splits as a positive signal, creating a short-term bump in valuations. Companies like Amazon, Shopify, and GameStop have used this tool to appeal to a wider base of investors, who might not be able to afford pre-split prices. Amazon, for example, announced a 20-for-1 split in March 2022, lowering its stock price from $2,785 to $139. Similarly, Shopify completed a 10-for-1 split but still saw its stock price slide by 76% in 2022. While stock splits may generate excitement, they do not guarantee long-term value. As Keith Buchanan, a senior portfolio manager at Globalt Investments, notes, a stock should be attractive based on its fundamentals—before and after the split. The real value comes from a company’s earnings, growth prospects, and market conditions, not from how the shares are divided.

Major Stock Splits Since 2010:

Amazon (AMZN): Amazon has had four stock splits in its history, the most recent being a 20-for-1 split in June 2022, reducing its share price from around $2,000 to $120 per share​(Money)​(CompaniesMarketCap).

Stock split list

Alphabet (Google) (GOOG): Alphabet split its stock 20-for-1 in July 2022, bringing down its per-share price from over $2,200 to about $110​(Money)​(CompaniesMarketCap).

Stock split list

Tesla (TSLA): Tesla executed a 5-for-1 split in August 2020 and followed it with another 3-for-1 split in 2022​(CompaniesMarketCap)

Apple Inc. has executed five stock splits in its history, each with the goal of making its shares more accessible to retail investors by lowering the price per share while keeping its market capitalization unchanged. Here’s a breakdown of Apple’s stock splits:

June 16, 1987 (2-for-1 split)

Apple’s first stock split was a 2-for-1 split, meaning that every shareholder received one additional share for each share they held, effectively halving the price of each share. This occurred when the stock price was relatively high for the time, helping to make Apple stock more affordable for smaller investors.

June 21, 2000 (2-for-1 split)

The second 2-for-1 split took place during the dot-com boom. Once again, Apple doubled its outstanding shares, halving the share price. Despite the crash of many tech stocks following the dot-com bubble, Apple’s growth continued as it expanded its product line with innovations like the iPod.

February 28, 2005 (2-for-1 split)

Apple’s third stock split also followed the 2-for-1 format. At the time, Apple was in the midst of a significant turnaround, spurred by the success of the iPod, iTunes, and other emerging products. This split reflected growing investor interest as the company began transitioning into a consumer electronics giant.

June 9, 2014 (7-for-1 split)

Apple made its fourth split a 7-for-1 split, which was one of the largest splits in corporate history. Before the split, Apple’s stock had been trading at around $650 per share. After the split, the price dropped to about $92 per share. This move was made in part to make Apple stock more accessible to a broader range of investors and to maintain its attractiveness on market indices, especially as it prepared to launch new products like the Apple Watch.

August 31, 2020 (4-for-1 split)

Apple’s most recent stock split was a 4-for-1 split in 2020. Prior to this, Apple shares were trading at over $500 per share, and the split reduced the price to around $125. This occurred during a surge in tech stock valuations, particularly as demand for tech products grew during the COVID-19 pandemic. This stock split made Apple’s shares more accessible to retail investors during a period of heightened interest in tech stocks, further fueling its rise.

Recent Major Stock Splits:

1. Nvidia (NVDA): Nvidia executed a 4-for-1 stock split in 2021, driven by the AI and semiconductor boom. The company’s stock price soared as investors bet heavily on its role in powering AI models, with Nvidia’s chips being essential to machine learning and neural networks​(Money). As of 2024, Nvidia continued to benefit from this AI frenzy, even executing further splits as its price climbed above $1,000​(CompaniesMarketCap)

Stock split list

AI Hype Mania and Market Bubble:

The AI mania has led to the rapid inflow of capital into companies perceived as AI leaders. Nvidia, for example, saw its stock price more than double in 2023, driven by the rise of generative AI models like ChatGPT, which require Nvidia’s GPUs. However, much of this stock growth was speculative, as investors rushed to get a piece of the AI boom without always considering whether the underlying technology justified such high valuations​(CompaniesMarketCap).

AI, while transformative, has become a focal point for investment mania, as investors pour billions into companies associated with AI without a full understanding of the technology’s maturity or actual profitability. The stock splits by companies like Nvidia and Alphabet amplify this bubble, as lower stock prices entice more retail investors to buy shares, further inflating stock values without any real change in a company’s fundamentals. This can create dangerous levels of overvaluation, disconnected from the actual earnings potential of these companies.

How Stock Bubbles are Disguised:

Stock splits can disguise overvaluation in an overheated market. By lowering the price per share through a split, companies make the stock appear more affordable, encouraging more investors to buy in, even if the underlying value (market capitalization) of the company doesn’t change. This tactic can sustain price growth artificially by increasing demand, especially among retail investors who might be swayed by the lower sticker price without fully understanding that the fundamentals of the company remain unchanged. Companies like Amazon and Google, whose shares traded above $1,000 for years before their splits, have used this method to attract more investors despite concerns of overvaluation​(CompaniesMarketCap)(Money).

Stock Price Manipulation:

The risk lies in the potential for companies to manipulate stock prices through repeated stock splits during bull markets. These splits can create a psychological effect, making stocks appear cheaper, while in reality, nothing changes in terms of the company’s performance. The market tends to rally on the announcement of stock splits, further inflating the bubble, especially if there is speculation about the company’s continued growth. This loophole exploitation in the financial regulatory framework can contribute to unsustainable stock price increases and market capitalizations that won’t necessarily reflect the intrinsic listed Companies’ Business value and revenues. When these overvaluations are corrected, the resulting crashes can have severe consequences for financial stability, harming both retail and institutional investors.

Risks for retail Investors of Equities Portfolio Wipe out:

For individual investors, stock splits can lead to overexposure to overvalued stocks. Since splits often attract retail investors who may lack experience, they can end up buying shares at inflated prices, particularly in sectors like tech, which experienced massive growth in the 2010s and early 2020s. When the inevitable correction occurs, these investors may face significant losses. Stock splits also open the door to market manipulation and speculative trading. When companies use stock splits as part of a broader financial strategy that includes aggressive share buybacks, it can give the appearance of liquidity while hollowing out actual value, leading to a scenario resembling a financial bubble.
The stock split trend has intersected with the “meme stock” movement, where retail investors, often driven by social media platforms like Reddit, fuel speculative buying. GameStop, a classic example, announced a 4-for-1 stock split despite its stock being far below its 2021 highs. The enthusiasm around meme stocks, combined with stock splits, can create momentum, but it can also lead to unsustainable price increases and severe corrections when reality catches up. Overall, while stock splits do not directly manipulate company fundamentals, they can be used to perpetuate stock bubbles, contributing to financial instability. Investors should remain cautious and consider the intrinsic value of a stock, rather than being swayed by the lower prices brought about by splits.

Systemic Financial Risk of a Stock Market Crash

The unchecked rise of stock splits, AI hype, and inflated valuations in the financial markets could precipitate a financial Armageddon—a catastrophic collapse of unprecedented scale. The systematic overvaluation of tech stocks driven by speculative retail investors and artificial stock price resets poses an existential threat to the global economy. As capital continues to flow into large-cap tech companies like Nvidia, Amazon, and Alphabet, the bubble swells beyond sustainable levels. When this bubble finally bursts, the shockwaves will be immense, leading to the rapid evaporation of trillions in market value.

In this scenario, entire segments of the global financial system could falter. Retail investors, pension funds, and financial institutions heavily invested in these overinflated stocks would find themselves unable to cover their losses. As stocks crash, so would the confidence in broader market stability, leading to a mass exodus from equities. Financial institutions heavily exposed to these large-cap companies could become insolvent, triggering a chain reaction across the banking and investment sectors. This massive economic meltdown would also erode public trust in the financial system, likely leading to long-term economic stagnation and widespread unemployment as corporate giants downsize or collapse.

Such a scenario risks pushing the global economy into deep recession or even, with millions of people losing their life savings. This financial Armageddon would also undermine capital formation, making it more difficult for both small businesses and individuals to access credit or investment, further deepening the economic damage. The collapse of overvalued stocks and their systemic risks would mark one of the most severe financial disasters in history, far exceeding the scope of previous crises like the dot-com bubble or the 2008 financial crash.

Takeaway
While stock splits can make shares more accessible to retail investors, they do not fundamentally change a company’s worth or growth prospects. With market conditions deteriorating and the broader economy slowing, investors should be cautious of overvalued stocks and speculative hype. In the long term, following market fundamentals and assessing the true value of a company will be more crucial than the temporary excitement that comes with a split.