$new .= "\n" while s/.$/ $new .= $&; '' /gem;
[download]

Did you test this?

$ time perl -e'
use Data::Dumper;
$Data::Dumper::Useqq = 1;
my $x = "123456789\n";
print Dumper $x;
my $new = "";  $new .= "\n" while $x =~ s/.$/ $new .= $&; '' /gem;
print Dumper $new;
'
$VAR1 = "123456789\n";
Out of memory!

real    1m54.230s
user    0m3.216s
sys     0m9.332s
[download]

BTW, my system has 32GB of RAM     ouch!