Your friend seems to assume that the "beauty" or "art" of Beet-hoven's music exists
in the music itself, and not from his conscious experience of the music. Have him listen to
Autechre (damn-it, won't link to the song; just search for Autechre on the BLEEP site, and take a listen to the song Gantz_Graf for this reference) and see if he considers it to be "art" or "beautiful". If he doesn't think it is a "beautiful" song, I can fill pages on why that song blows Beethoven out of the water (well, maybe not Beet-hoven, he's da bomb, but definitely that chump Mozart). The point is it doesn't matter how complex the system is, the individual imposes the “art” of the system/object on the object. Run to the library and find a book of post-modern art or found-art, and see how art can come from the
description alone of the object, regardless of the complexity or origin of the object.
So yes, a machine can produce "art". Whether or not that same machine can "appreciate" said art is a different question entirely.