The world has witnessed rapid technological transformation, past couple of decades and with Advent of Cloud computing the landscape evolved exponentially leading to efficient and scalable application development. Now, the past couple of years the digital ecosystem has brought in numerous innovations with integration of Artificial Intelligence commonly known as AI. This paper explores how AI and cloud computing intersect to deliver transformative capabilities for modernizing applications by providing services and infrastructure. Harnessing the combined potential of both AI & Cloud technologies, technology providers can now exploit intelligent resource management, predictive analytics, automated deployment & scaling with enhanced security leading to offering innovative solutions to their customers. Furthermore, by leveraging such technologies of cloud & AI businesses can reap rich rewards in the form of reducing operational costs and improving service delivery. This paper further addresses challenges associated such as data privacy concerns and how it can be mitigated with robust AI governance frameworks.