Spotify (NYSE:SPOT) shares gave back an early 5% gain in rapid fashion Wednesday morning following an announcement from Google (NASDAQ:GOOGL) that its Gemini platform is now capable of producing music. The stock swung from being up 5% to flat within minutes and later finished the session up 2%, reflecting investor uncertainty about how generative audio tools might affect established streaming services.
Google unveiled Lyria 3, a music-generation model released in beta to users of the Gemini app. The system can produce 30-second musical pieces from simple text prompts or from uploaded images. Outputs may include vocal and instrumental arrangements across multiple genres, and each piece can come with automatically generated lyrics.
The company described three main enhancements in Lyria 3. The model can create lyrics automatically, it offers finer creative control over musical attributes such as style and tempo, and it is capable of assembling more complex compositions than prior iterations. Creators can either type a description of their idea or submit a photograph; the model will analyze the image and compose a track intended to match the visual input. Google also generates custom cover art for each composition using its Nano Banana image generation system.
To help identify AI-produced material, Google is implementing SynthID watermarking and has broadened verification tools to detect AI audio in addition to existing image and video detection capabilities. The company is also integrating Lyria 3 into YouTube's Dream Track feature for content creators.
Google stated that the feature is designed to avoid producing content that mimics specific artists, instead using artist names only as loose creative reference points. Access is limited to users aged 18 and older, available in eight languages, and those with Google AI Plus, Pro, or Ultra subscriptions receive higher usage limits.
The market reaction highlights investor apprehension about how advances in generative technologies could disrupt incumbent players in the music streaming ecosystem. Recent selling pressure in companies seen as potentially affected by rapid AI development appears consistent with that concern.
Note: This article reports on the market reaction to a product announcement and details provided by the company. It does not make future performance predictions for any security mentioned.