Why Do Stock Prices Change If the Number of Shares Is Fixed?

Stock prices fluctuate constantly, even though the number of shares in circulation remains fixed (unless new shares are issued). This phenomenon is driven by supply and demand, market sentiment, and advanced trading mechanisms—including AI-powered trading bots that now dominate financial markets.

In this article, we’ll break down why stock prices change, how supply and demand affect valuation, the impact of AI-driven trading, and whether stockholders can sell at a high price when no stocks are available.

1. The Core Principle: Supply and Demand

The stock market operates like an auction where buyers and sellers negotiate prices.

If more people want to buy a stock than sell it, demand exceeds supply, and the price rises.
If more people want to sell than buy, supply exceeds demand, and the price falls.

Since companies issue a fixed number of shares, the price changes based on how much buyers are willing to pay and how much sellers are willing to accept.

Example of Supply & Demand in Action:

Imagine Company XYZ has 1 million shares available in the market.

If a breakthrough AI product is announced, investors may rush to buy shares, increasing demand.
If current shareholders are not willing to sell at the current price, buyers start bidding higher prices to convince sellers.
As a result, the stock price increases.

Conversely, if negative news spreads (e.g., a regulatory crackdown on AI technologies), investors may panic sell, overwhelming demand and causing the price to drop.

2. The Role of Bid & Ask Prices

Every stock trade involves two key prices:

Bid Price: The highest price a buyer is willing to pay.
Ask Price: The lowest price a seller is willing to accept.

When a buyer matches a seller’s ask price, a trade occurs, and the last traded price updates accordingly.

AI’s Role in Price Matching

Modern stock exchanges are dominated by AI-powered algorithms that execute trades in milliseconds. These bots:
✔ Analyze real-time bid/ask spreads
✔ Identify profitable trades based on supply-demand imbalances
✔ Adjust their orders dynamically to maximize efficiency

This has increased market liquidity but also made price movements more volatile and unpredictable due to high-frequency trading (HFT).

3. What Happens When No One Is Selling?

If demand for a stock surges and few sellers are willing to sell, the stock price skyrockets because buyers must outbid each other. This is known as a liquidity crunch.

AI’s Role in Illiquid Markets

AI-driven trading bots detect low liquidity situations and exploit them by buying up shares early before prices surge.
Some hedge funds use sentiment analysis AI to detect social media trends (like Reddit’s WallStreetBets) and buy before a price spike.
Market-making AI systems provide automated liquidity by stepping in to buy or sell shares when no human traders are available.

Can a Stockholder Sell at a Very High Price in This Situation?

Yes—but with some conditions:

✅ If demand is strong, a seller can set a high ask price, and AI bots or human traders might agree to pay it.
❌ However, if no buyers (human or AI) are willing to pay that price, the seller may be forced to lower it or wait.

This is why stocks of highly sought-after companies (like Tesla or Nvidia) can see extreme price jumps when demand spikes.

4. AI-Driven Market Making & Liquidity Providers

Even when there’s a shortage of sellers, stock trading continues because of AI-powered market makers—large financial institutions that use AI to buy and sell stocks continuously.

AI ensures liquidity, so the market doesn’t freeze.
If demand rises, AI-driven market makers sell shares from their own holdings and adjust prices dynamically.
This helps smooth out volatility and prevents price manipulation.

Example: Citadel Securities & AI Market Making

Citadel Securities, one of the largest market makers, uses deep learning models to forecast demand surges and adjust pricing in real-time.
Their AI algorithms execute billions of trades daily, ensuring that no single investor (or small group) can artificially inflate or crash prices.

5. Real-World Examples of AI Impacting Stock Prices

🔹 Tesla (TSLA) – AI-Driven Demand Surge

In 2020, Tesla’s stock price skyrocketed, driven by:
✅ AI-powered hedge funds detecting strong investor sentiment
✅ Algorithmic trading bots bidding up the stock faster than humans
✅ Retail traders using AI-based stock prediction apps to jump in early

🔹 GameStop (GME) – AI vs. Retail Traders

In early 2021, a short squeeze caused GameStop’s price to skyrocket.

AI bots detected the squeeze early and joined the buying frenzy.
Hedge fund algorithms reacted instantly, either covering shorts or taking new short positions.
The extreme volatility was fueled by AI trading at lightning speeds while retail traders executed orders manually.

6. Final Takeaways: The AI Revolution in Stock Trading

✅ Stock prices change based on supply & demand, not the number of shares available.
✅ If no one is selling, buyers (including AI bots) bid higher to convince sellers to trade.
✅ AI-powered trading bots now dominate markets, making price movements faster & more volatile.
✅ Market-making AI ensures liquidity, preventing extreme price manipulation.

Why Do Stock Prices Change If the Number of Shares Is Fixed?