Transformers Provably Learn to Internalize Chain-of-Thought

Language models typically reason via explicit chain-of-thought (CoT), generating intermediate steps token-by-token. Latent CoT offers an alternative: it performs multi-step reasoning in the model's hidden states, replacing decoded tokens with continuous representations for greater efficiency. However, existing latent CoT methods underperform explicit CoT beyond 1B parameters, and the gap widens with scale. Looped, or recurrent-depth, Transformers, which reuse their weights to increase computation depth without adding parameters, are a natural fit for latent reasoning. We therefore ask whether looped Transformers can bridge this gap. We answer affirmatively with a simple recipe: a looped padded Transformer that processes K latent blocks in parallel for R iterations, with a cross-entropy loss on each latent position's gold CoT-step token, similar to explicit CoT supervision. We instantiate it as LOTUS (Looped Transformers with parallel supervision on latents). LOTUS is, to our knowledge, the first latent-CoT method to bridge the gap to explicit CoT at the 3B scale, while cutting thought-phase latency by 2.5x-6.9x from compact math expressions to natural language. Projecting LOTUS's post-loop latents through the base LM head recovers the gold reasoning steps and even surfaces alternative valid intermediate steps, evidence that its latent space is interpretable and CoT-aligned. Ablations confirm that both the looped backbone and the parallel supervision on gold CoT tokens are essential. Code is available at https://github.com/yingfan-bot/lotus.

Chain-of-Thought (CoT) has been shown to empirically improve Transformers' performance, and theoretically increase their expressivity to Turing completeness. However, whether Transformers can learn to generalize to CoT traces longer than those seen during training is understudied. We use recent theoretical frameworks for Transformer length generalization and find that -- under standard positional encodings and a finite alphabet -- Transformers with CoT cannot solve problems beyond $TC^0$, i.e. the expressivity benefits do not hold under the stricter requirement of length-generalizable learnability. However, if we allow the vocabulary to grow with problem size, we attain a length-generalizable simulation of Turing machines where the CoT trace length is linear in the simulated runtime up to a constant. Our construction overcomes two core obstacles to reliable length generalization: repeated copying and last-occurrence retrieval. We assign each tape position a unique signpost token, and log only value changes to enable recovery of the current tape symbol through counts circumventing both barriers. Further, we empirically show that the use of such signpost tokens and value change encodings provide actionable guidance to improve length generalization on hard problems.

The increasing popularity of \emph{reasoning} models -- language models that output a series of reasoning or thought tokens before producing an answer -- is justified, in part, by theoretical results showing that chain-of-thought (CoT) transformers can simulate Turing machines, and thus perform arbitrary computation. However, the Turing machine, while suitable for complexity-theoretic analysis, is not convenient, intuitive, or efficient for discussing algorithms. Algorithms are typically designed and analyzed at a higher level of abstraction, captured by the \emph{Word RAM} model with random-access memory and unit-cost operations on $\bigO(\log n)$-bit words. As a result, Word RAM algorithms can be substantially more efficient than their Turing machine counterparts, raising the question: \emph{Can CoT transformers efficiently simulate Word RAM algorithms?} For instance, can they sort $n$ items in $\bigO(n \log n)$ steps or run Dijkstra's algorithm in $\bigO(E + V \log V)$ steps? We answer affirmatively, up to poly-logarithmic overhead. We first establish this for finite-precision transformers with poly-logarithmic width and rightmost unique hard attention, then strengthen the result to two more practical settings with finite width and log-precision: \emph{continuous} CoT, where reasoning takes the form of vectors rather than tokens, and a \emph{hybrid} architecture in which transformer layers sit atop a recurrent (linear RNN) layer. In all three cases, we find that CoT \emph{can} efficiently simulate any Word RAM algorithm with only a poly-logarithmic overhead in $n$. This overhead reduces to log-square when the Word RAM has a ``flat'' instruction set, and only logarithmic for multiplication-free flat instructions -- in stark contrast to known CoT simulations of Turing machines, which require quadratic overhead over Word RAM.