Stock-Split Watch: Is Microsoft Next?

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Stock-Split Watch: Is

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Next?

Amid the stock split talk, investors need to keep

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(NASDAQ: MSFT) in mind. The current price of around $460 per share is well below the nominal prices at which stocks like Broadcom or Nvidia recently announced splits.

Admittedly, it might be presumptuous to say that

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is the next stock split. Many stocks are soaring to very high triple-digit prices amid an improving economy and game-changing market shifts in the tech sector. However,

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differs from these names in one key area, which could prompt a split sooner rather than later.

Why

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may split soon

Put simply,

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may split soon because it is one of the 30 stocks that make up the

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. Unlike the other major indexes, the Dow is a price-weighted index. This means stocks with high nominal prices have disproportionate sway over the index score.

Admittedly, the index’s price-weighting approach ******** controversial. So far, Berkshire Hathaway has allowed its shares to maintain a very high price rather than seek inclusion in the Dow. Nonetheless, other companies like

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value being a Dow component and will probably bow to pressure to split its stock to maintain that status.

That pressure could come soon as it is among the highest-priced stocks in the Dow 30. It closely approximates Goldman Sachs’s current price and is close in price to UnitedHealth Group, which sells at around $505 per share right now.

Additionally, investors may recall that Dow component Apple initiated a 4-for-1 stock split in August 2020 when its pre-split price was close to $500 per share. Thus, it should not surprise anyone if

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were to announce a stock split in short order.

The growth of

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Investors should also remember that

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is, ultimately, a stock split candidate because of its underlying business growth. The company’s paradigm shifted after Satya Nadella became CEO in February 2014.

Nadella’s most notable accomplishment was making

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more of a cloud-oriented business, shifting its software products to the cloud and making them mobile-friendly. Under Nadella’s leadership,

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’s Azure became the second-most popular cloud infrastructure platform, lagging behind only

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’s

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Web Services, which pioneered the industry.

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Image source: Statista.

Also, Nadella made

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more artificial intelligence (AI)-oriented. The company partnered with OpenAI to link its search engine to ChatGPT. Through this, it launched Copilot, a chatbot powered by

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. This partnership also linked ChatGPT with its

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search engine, making

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a credible competitive threat to Alphabet’s search business.

Story continues

As a result,

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’s market cap has grown to over $3.4 trillion, making it one of the world’s largest publicly traded companies. Given that the cloud and AI will probably continue growing for years to come, the company’s growth would eventually make a split necessary, even without the association with the Dow.

The coming

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stock split

Ultimately, when

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will next split its stock is unclear, but a split is likely coming soon.

Admittedly, its position as one of the Dow 30 stocks is likely to hasten a split. Allowing

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’s stock price to climb much further without a softening stock split could give the software giant an uncomfortably strong influence over the popular market index. However, investors should probably credit the company’s tech-driven growth for making the split necessary in the first place.

Under Nadella,

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is back on the cutting edge of tech and has positioned itself as a major force in the cloud and AI industries. Such industry leadership should keep its stock growing, making an eventual split likely with or without any Dow-related pressure.

Should you invest $1,000 in

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right now?

Before you buy stock in

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, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 

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*Stock Advisor returns as of July 8, 2024

John Mackey, former CEO of Whole Foods Market, an

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subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors.

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has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Alphabet,

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, Apple, Berkshire Hathaway, Goldman Sachs Group,

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, and Nvidia. The Motley Fool recommends Broadcom and UnitedHealth Group and recommends the following options: long January 2026 $395 calls on

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and short January 2026 $405 calls on

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. The Motley Fool has a

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.

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was originally published by The Motley Fool

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#StockSplit #Watch #

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