Shares of Russian Internet company Yandex NV rose more than 40 percent, the largest U.S. initial public offering in the Internet sector since Google Inc.

The IPO of Russia's most popular search engine was about 17 times oversubscribed, a source told Reuters. The intense demand for the shares comes on the heels of the IPO of U.S. professional networking company LinkedIn Corp, raising comparisons with the dot-com boom of the late 1990s.

Yandex raised $1.3 billion in its IPO on Monday by selling 52.2 million shares for $25 each. The offering valued the overall company at about $8 billion. In 2000, a group of private-equity investors led by Baring Vostok Capital Partners bought a 36 percent stake for just over $5 million.

Unlike social-networking sites like LinkedIn, Yandex's business model, driven by online advertising, has generated strong growth in earnings.

For the company to deliver on its growth proposition, however, it will have to defend its market share in Russian search, now at 65 percent against Google's 22 percent.

Analysts say that the search engine devised by co-founders Arkady Volozh and Ilya Segalovich has a competitive advantage over Google, because it is better equipped to handle the grammatical complexities of the Russian language.

Morgan Stanley, Deutsche Bank Securities and Goldman Sachs & Co led the underwriters on the offering.

The shares rose to $35.11 in early trading, above the $25 IPO price.

(Reporting by Clare Baldwin. Editing by Robert MacMillan and Derek Caney)

(This article has been modified to correct the opening share price to $35)