According to Goldman Sachs, the music industry is on the brink of a significant transformation due to generative AI, offering “significant opportunities” for the sector, CNBC reports.

Goldman Sachs has identified five buy-rated stocks to leverage this trend: Live Nation (NASDAQ:LYV), Warner Music Group (NASDAQ:WMG), French digital music company Believe (NASDAQ:BLV), China’s NetEase (NASDAQ:NTES), and Universal Music Group (NASDAQ:UMGNF). All these stocks feature on Goldman’s conviction list of top stocks.

Analysts at Goldman Sachs believe that generative AI will enhance music creation capabilities and boost productivity. They also suggest that concerns over AI-generated music are “overstated”.

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"We believe the music industry is on the cusp of another major structural change given the persistent under-monetization of music content, outdated streaming royalty payout structures and the deployment of Generative AI," the analysts mentioned.

Despite the ease of access to music through streaming, revenue has not kept pace with consumption. Goldman Sachs estimates that the revenue per audio stream has fallen 20% in the past five years. However, the bank sees potential in Live Nation due to the expected increase in artist tours and the globalization of music.

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