The Gunners spent £30m to land the Chile international from Barcelona as their first signing of the summer, and Holloway feels that move has pushed them closer to their top-flight rivals.
He wrote in his column in The Mirror: "Arsenal are now genuine Premier League title contenders. The signing of Alexis Sanchez has transformed the Gunners from a team that will always be capable of finishing in the top four into one that can land the biggest prize.
"Arsenal built a sustained title challenge last season – until Olivier Giroud hit the wall. Winning the FA Cup in May was a significant step.
"But spending £30million on a stellar name like Sanchez is a real statement of intent. I can't wait to see him make the most of the creativity already in place at the Emirates."