Wall Street’s most expensive arms race is about to face one of its biggest tests. When Amazon and Alphabet, Google’s parent company, report on fourth-quarter results this week, investors will look to see whether the vast wave of spending on artificial intelligence is paying its way.

Both companies have poured tens of billions of dollars into AI infrastructure, talent and partnerships. At Amazon, attention will be on the momentum of Amazon Web Services (AWS), which provides on-demand cloud computing platforms. The cloud division surprised on the upside in the third quarter, growing faster than expected and helping the group to beat forecasts on both revenue and profit.

AWS growth was “well ahead of expectations”, Wedbush Securities said, with its analysts encouraged by the implied level of future demand given the pace of backlog expansion and infrastructure build-out planned over the next year. The broker expected 2026 to be a “big year for AWS”, helping to catalyse Amazon shares towards its $340 price target. Amazon shares are currently $239 apiece.

That sets a high bar for the fourth quarter. Investors will look for confirmation that AWS growth has not only held up but is accelerating as companies roll out AI-heavy workloads and shift more data processing to the cloud. Signs of early AI monetisation, whether through new services, higher pricing or deeper customer engagement, will be critical.

Alphabet faces a similar but broader set of questions. The company is as a perceived frontrunner in AI thanks to its deep pockets, strong cashflow and the sheer scale of its existing platforms, from search and YouTube to Gmail, Maps and Chrome, which provide both data and distribution for AI-powered services.

Its third-quarter results underscored that strength. Revenue rose 16 per cent year on year, driven by advertising across search and YouTube and solid growth in Google Cloud. Management pointed to AI-enhanced targeting and campaign performance as a contributor, alongside global demand for data storage and processing.

Investors will want to see more of the same in the fourth quarter as well as a reassurance that AI is helping to defend Alphabet’s core search franchise, not simply adding costs. Guidance for the first quarter will also be closely watched, particularly as advertising enters what could be a strong year, boosted by the Winter Olympics, the summer’s football World Cup and US mid-term elections in the autumn.

Consensus forecasts point to fourth-quarter sales growth of 15 per cent to $111.4 billion, while first-quarter revenue is estimated to come in at $103.7 billion.

Amazon is reported to be in early-stage talks about investing up to $50 billion in OpenAI, the ChatGPT maker, in what would be one of the largest single bets yet on generative AI. Andy Jassy, Amazon’s chief executive, is said to be leading discussions with Sam Altman of OpenAI.

At the same time Amazon has cut costs aggressively. It announced plans to axe a further 16,000 jobs globally, following 14,000 white-collar cuts in October, as it seeks to strip out management layers and bureaucracy. While the company has linked earlier reductions to the rise of AI software, Jassy has insisted the latest move is more cultural than financial.