What happened

Alphabet (GOOGL -0.27%) (GOOG -0.28%) rose more than 4% on Thursday, furthering the rally in the tech titan's stock price that began earlier this week. Investors are bidding up Alphabet's shares following its recent moves in the rapidly expanding artificial intelligence (AI) arena.

So what 

On Tuesday, Alphabet announced a partnership with AI start-up Midjourney. Google Cloud will serve as Midjourney's preferred cloud infrastructure provider. Midjourney will use Google's cloud computing services and custom-designed chips to train the AI models that power its popular text-to-image applications.

"As AI opens the door for innovation across industries, companies like Midjourney are choosing Google Cloud to take advantage of our open, flexible, and performant infrastructure, which runs with incredible scale and efficiency," Google Cloud executive Amin Vahdat said in a press release. 

Alphabet also unveiled some intriguing new AI capabilities for its suite of productivity apps earlier this week. Initially, Google is adding generative AI features to Gmail and Google Docs to help users more easily write and edit their emails and documents. 

Google is testing these new AI tools with a select group of users. It plans to roll them out more broadly, along with additional AI features, later this year.

Now what

Alphabet's shares sold off in February after Microsoft announced its plans to integrate ChatGPT creator OpenAI's technology into its Bing search engine, in a bid to wrestle away market share from Google. On Thursday, Microsoft also unveiled new AI features for its popular Word, Excel, PowerPoint, and Outlook productivity software.

But the recent rally in Alphabet's share price suggests investors now believe the tech juggernaut will be able to hold its own against Microsoft in the AI arms race. If that remains the case, more gains could lie ahead for Alphabet's shareholders.