Although historically hot trends like artificial intelligence (AI) dominate the headlines on Wall Street, it was the euphoria surrounding stock splits that played an equally impressive role in driving the broader market higher in 2024.

Put simply, a stock split is a tool that publicly traded companies can use to adjust their stock price and the number of shares outstanding by the same factor. The beauty of stock splits is that they are purely cosmetic and have no impact on a company’s market capitalization or underlying operating performance.

There are two types of stock splits – forward and reverse splits – with the former far more popular than the latter in the investment community.

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Reverse splits are conducted to increase a company’s stock price, often with the goal of maintaining listing standards for a major stock exchange. Because most reverse stock splits are conducted from a position of operational weakness, investors avoid this type of split.

Meanwhile, forward stock splits are designed to lower a company’s stock price to make it more nominally affordable for retail investors who don’t have access to buying fractional shares through their broker. Companies with high-flying stocks that require a forward split to make their stock “nominally more affordable” tend to be more successful and innovative than their competition.

Since the curtain opened on 2024, 13 phenomenal companies have announced or completed stock splits – none of them more eagerly awaited than that of AI giant NVIDIA (NVDA -3.70%). Given that companies that perform forward splits have more than doubled the benchmark return since 1980 S&P500 In the twelve months following the split announcement, investors wait anxiously to guess which top stock will undergo a forward stock split next.

Nvidia had all the hallmarks of a stock split on Wall Street

Before Nvidia announced its largest stock split in history (10:1) on May 22, there were more than enough indications that a stock split was imminent.

The obvious clue with Nvidia was that its shares rose 550% between the start of 2023 and the day the company released its first-quarter financial results and announced its historic split. No one on Wall Street has ever seen a market-leading company gain around $2.8 trillion in market capitalization in the blink of an eye.

To expand on this point, Nvidia’s stunning returns have made the company particularly popular with retail investors. It is the fourth most held security (including exchange-traded funds) on the retail-dominated online trading platform RobinhoodThe fact that retail investors don’t have to save $1,300 to buy a single Nvidia share could help sustain the euphoria behind the stock’s near-parabolic rise.

Nvidia’s market-leading status among developers of graphics processing units (GPUs) for AI-accelerated data centers also made the company a logical candidate for a stock split. Semiconductor analytics firm TechInsights estimates that of the 2.67 million GPU shipments for data centers in 2022 and 3.85 million GPU shipments in 2023, all but 30,000 GPUs in 2022 and 90,000 GPUs in 2023 were Nvidia’s. The company has a firm grip on the market share of GPUs that power generative AI solutions and train large language models (LLMs) in enterprise data centers.

The company’s CUDA computing platform is another reason why Nvidia’s stock split made sense. CUDA is the toolkit that lets developers build LLMs and accelerate computing applications. The key point is that Nvidia’s software works in tandem with its top-notch hardware to lock businesses into the company’s myriad products and services.

Nvidia is laying out the blueprint for what to look for in future stock splits, and one logical candidate stands out.

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Prediction: This 150,000% winner will be the next high-profile stock split announcement on Wall Street

As far as big-name, proven, and dominant companies go, I would expect the next high-profile stock split announcement on Wall Street to come from a warehouse club. Costco Wholesale (COST -0.44%).

Although its shares don’t rise every year, Costco is poised to break out of the pack. Including dividends paid, Costco has delivered a positive total return to shareholders in 20 of the last 23 years. Even more impressive, the value of its shares has increased 150,000% since its IPO in December 1985, including dividends.

It’s been nearly a quarter century since Costco last conducted a stock split. The three previous splits occurred in January 2000 (2-for-1), March 1992 (3-for-2) and May 1991 (2-for-1). With the company’s stock worth nearly $900, it’s safe to assume that some retail investors who don’t have access to fractional shares will be forced to hold off.

One of Costco’s biggest and clearest competitive advantages is its size. The company’s bulging coffers allow it to buy goods in bulk, which lowers the unit cost of each item. Because price is such an important consideration for shoppers, bulk buying has helped Costco undercut traditional grocery chains and mom-and-pop stores on price.

It’s important to note that Costco’s warehouses sell a mix of convenience and everyday consumer goods. No matter how well the U.S. economy is doing or how high the prevailing inflation rate is, consumers still need to buy groceries and basic household items. In other words, Costco attracts consumers in any economic climate, which typically results in very predictable sales and operating cash flow.

Another noticeable advantage Costco brings is its membership-based operating model. Annual membership fees generate high margins and can be used to offset the low prices and razor-thin margins on groceries, helping the company attract new members. In addition, paying an annual fee to shop at Costco likely encourages consumers to get as much as possible out of their membership. In short, they will choose Costco over other shopping options when making large purchases.

The final piece of the puzzle for Costco is its extraordinary pricing power. Starting Sept. 1, annual fees for its Gold Star and Business memberships will increase by $5 to $65, while Executive memberships will increase by $10 to $130 per year. The first membership fee increase since 2017 won’t deter this big-box store club’s loyal customers.

So when Costco reports fourth-quarter results on September 26, it should come as no surprise if the company also announces its first stock split since January 2000.