Nvidia Corp. delighted investors when it announced a 10-for-1 stock split earlier this week. The move may be the start of a trend, as several prominent tech companies trade at prices high enough to tip the scales toward similar splits, according to a note from Bank of America.

The bank highlights 36 S&P 500 companies with stock prices above US$500, a level suggesting they may be candidates for splits. Two members of the Magnificent Seven — Microsoft Corp. and Meta Platforms Inc. — approach that threshold.

“Stocks with high share prices are typically prime candidates for split announcements,” the note’s authors, led by Jared Woodard, wrote. “Management teams might feel that lower stock prices broaden access to the stock.”

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Broadcom Inc., Super Micro Computer Inc., ServiceNow Inc., and Netflix Inc. are also among the companies BofA suggested could be candidates for splits, given their share prices. Booking Holdings Inc. could be high on the list as well, as one share of the online travel agency goes for more than $3,500. Earlier this year, Booking initiated a dividend, another move seen as shareholder-friendly.

BofA’s list includes companies from a variety of sectors, with AutoZone Inc., Regeneron Pharmaceuticals Inc. and Eli Lilly & Co. also coming with hefty price tags. Earlier this year, Chipotle Mexican Grill Inc. announced a historic 50-to-1 split.

The significance of stock splits is more psychological than fundamental, as the value of an investor’s stake won’t change, even as the number of shares they own does. In Nvidia’s case, one share — currently valued around $1,000, making it among the ten highest priced in the S&P 500 Index — is slated to turn into 10 with a value of about $100 each.

While a high price doesn’t necessarily translate to a high valuation, a lower price could make a stock look more appealing, especially for retail investors. Nvidia is already the top holding among retail investors, according to a May 22 Vanda Research report, which touted the chipmaker’s “exceptional share price performance” for its popularity. Nvidia has more than doubled this year, building on last year’s surge of almost 240 per cent. 

BofA sees splits as “a sign of strength,” and notes that companies that split their stocks tend to see strong returns in the subsequent year. 

“Historically, stocks have notched 25 per cent total returns in the 12 months after a split is announced, compared to 12 per cent for the broad index,” it wrote, adding that outperformance “is no guarantee,” as while a split can signify strong momentum, companies can also struggle in challenging environments.

Nvidia’s split was the second time it’s made such a move in recent years, following a 4-for-1 split announced three years ago. Other megacap tech stocks with splits in recent years include Apple Inc. and Tesla Inc.