The 31-year-old singer thinks the landscape will change because people "don't actually want the real world" and prefer to be in a "simulation" where thinks seem better because they have been manufactured.
Speaking on Sean Carroll's 'Mindscape' podcast, she said: "I think live music is going to be obsolete soon... DJs get paid more than real musicians.
"It's kinda like Instagram or whatever. People are actually just gravitating towards the clean, finished, fake world.
"Everyone wants to be in a simulation. They don't actually want the real world.
"Even if they think they do and everyone's like, 'Yeah, cool, live music!' if you actually look at actual numbers of things, everyone's gravitating towards the shimmery perfected Photoshop world."
And the 'Genesis' singer suggested she would welcome the change.
She admitted: "As a performer, I hate the potential of failure in front of a giant audience."
Grimes also believes technology is taking away barriers to the affordability and accessibility of musical equipment.
She noted: "[The world will hit] a singularity point in 5 or 10 years where you won't need really anything. [But] there's things right now that just don't sound as good if you don't have hardware."
And the 'So Heavy' singer also believes artificial intelligence (AI) will ultimately lead to "the end of human art".
She said: "Once there's actually AGI (Artificial General Intelligence), they're gonna be so much better at making art than us...once AI can totally master science and art, which could happen in the next 10 years, probably more like 20 or 30 years."