Perplexity is raising new investment that would value the search startup at $9 billion, a source familiar with the matter said on Tuesday, a sign of heightened investor enthusiasm around artificial intelligence companies.

California-based Perplexity is set to raise $500 million in the new funding round led by venture capital firm Institutional Venture Partners (IVP), which also holds a board seat in the startup, the source said.

The company had raised $73.6 million in Series B funding in January. The funding round, led by IVP, had valued the company at about $520 million.

The meteoric success of OpenAI's ChatGPT has attracted investors to AI startups as businesses are racing to adopt the technology. Building large language models (LLMs) also requires billions in funding.

OpenAI closed a $6.6 billion funding round last month, which could value the company at $157 billion and cement its position as one of the most valuable private companies in the world.

Since the release of ChatGPT, publishers have been raising the alarm on chatbots that can comb the internet to find information and create paragraph summaries for the users.

Media conglomerate News Corp-owned publishers sued Perplexity in October, claiming that the startup engages in a "massive amount of illegal copying" of their copyrighted work.

New York Times also sent Perplexity a "cease and desist" notice last month, demanding it stop using the newspaper's content for generative AI purposes.

Perplexity, which provides information by searching the internet, is also backed by Amazon.com founder Jeff Bezos and chip designer Nvidia.

The AI company is among the leading firms attempting to uproot the search engine market dominated by Alphabet's Google.

The Wall Street Journal first reported on the funding being finalised by Perplexity.