Inference-time computation has emerged as a promising scaling axis for improving large language model reasoning. However, despite yielding impressive performance, the optimal allocation of inference-time computation remains poorly understood. A central question is whether to prioritize sequential scaling (e.g., longer chains of thought) or parallel scaling (e.g., majority voting across multiple short chains of thought). In this work, we seek to illuminate the landscape of test-time scaling by demonstrating the existence of reasoning settings where sequential scaling offers an exponential advantage over parallel scaling. These settings are based on graph connectivity problems in challenging distributions of graphs. We validate our theoretical findings with comprehensive experiments across a range of language models, including models trained from scratch for graph connectivity with different chain of thought strategies as well as large reasoning models.

Large language models have the ability to generate text that mimics patterns in their inputs. We introduce a simple Markov Chain sequence modeling task in order to study how this in-context learning capability emerges. In our setting, each example is sampled from a Markov chain drawn from a prior distribution over Markov chains. Transformers trained on this task form \emph{statistical induction heads} which compute accurate next-token probabilities given the bigram statistics of the context. During the course of training, models pass through multiple phases: after an initial stage in which predictions are uniform, they learn to sub-optimally predict using in-context single-token statistics (unigrams); then, there is a rapid phase transition to the correct in-context bigram solution. We conduct an empirical and theoretical investigation of this multi-phase process, showing how successful learning results from the interaction between the transformer's layers, and uncovering evidence that the presence of the simpler unigram solution may delay formation of the final bigram solution. We examine how learning is affected by varying the prior distribution over Markov chains, and consider the generalization of our in-context learning of Markov chains (ICL-MC) task to $n$-grams for $n > 2$.