Suno said on Wednesday it has raised $250 million in a funding round led by Menlo Ventures, valuing the artificial intelligence music company at $2.45 billion, as it aims to develop more sophisticated tools for song creation.

The Massachusetts-based company allows users to generate songs via AI prompts, but has been caught in a copyright dispute with record labels such as Warner Music Group (WMG), Universal Music Group (UMG), and Sony Music Group.

Suno's series C funding round also saw participation from Nvidia's venture capital arm NVentures, Hallwood Media, Lightspeed, and Matrix.

The music industry is seeing an increase in AI-generated songs which are hard to distinguish from human-made music.

The trend was highlighted earlier this year when the AI band "The Velvet Sundown" had attracted one million Spotify listeners monthly.   The trend could reshape how platforms monetize songs and pay artists, while raising ethical and copyright concerns.  

"In just two years, we've seen millions of people make their ideas a reality through Suno, from first-time creators to top songwriters and producers integrating the tool into their daily workflows," Suno co-founder and CEO Mikey Shulman said.  

Rising popularity of AI tools is drawing investor attention toward startups that can generate new content and revenue lines.  

Last month, Universal Music Group (UMG) settled a copyright case with another AI music company Udio.

The two companies plan to launch an AI-powered music creation platform in 2026, using licensed music to train the tool.