Having lost over two hours to wheel and suspension repairs on Monday, Alonso and co-driver Marc Coma rebounded by finishing fifth fastest in the 427km loop around Neom.
Alonso was just six minutes behind stage winner Carlos Sainz, and subsequently described his day as "very positive".
"We had a stage without setbacks, with good visibility - even going back [towards Neom], every car that we were catching had a flat tire or was lost," Alonso said.
"We had a track without cars and without dust. The only setback was in the last part, that we got lost for a bit in a river, we could not find the way.
"[Otherwise] it was a good day that left a good taste.
"Yesterday was a surprise. The result was negative and losing those hours was not expected, but the sensations were good yesterday and today also, I feel comfortable with the car.
"Seven months ago I had never climbed onto a dune with a car, now to be able to be again among the first four-five for the second consecutive day is a positive note.
"But I always want a little more and hopefully I can take advantage of the good starting position tomorrow or in the next few days to try something else and be among the first three or hopefully win a stage, which would be magical."
Dakar's rally director David Castera previously tipped Alonso to win a stage in the 2020 edition, despite the two-time Formula 1 champion's relative lack of off-road experience.
Though Alonso's pace over the past two days suggests he may have been in the mix at the sharp end of the classification if not for the delay on Monday, he does not see it as a lost opportunity.
"We've only been here for three days and there's going to be a lot more drama than we've experienced.
"It happened to me yesterday, today we saw [Khalid] Al Qassimi's Peugeot that was in pieces, and many more things will happen to many people.
"Let's hope that the minimum possible will happen to us and that we will reach stage 12 and get the whole experience.
"But if I can find a good pace and visibility on some stage, I hope to make the top three or even get a dream stage win. It seems impossible, but I have more confidence after these two stages."