Technology companies are gearing up for their latest batch of earnings reports, and Wall Street will be looking for proof that artificial-intelligence investments are paying off.

Amazon.com is expected to report earnings the week of Oct. 21, while Apple, Microsoft, and Meta Platforms are expected to report around Oct. 29.

Investors want to see that these companies are monetizing AI, to support their lofty stock valuations and massive spending on the rapidly growing technology.

The stock market is performing well as earnings season approaches again. The S&P 500 is up 14% this year, while the tech-heavy Nasdaq Composite has risen 18%. But what's new are the increasing concerns about an AI bubble as tech valuations continue to rise.

These worries intensified in August after OpenAI CEO Sam Altman acknowledged the hype over the technology: "Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes. Is AI the most important thing to happen in a very long time? My opinion is also yes."

Five of the Magnificent Seven stocks -- a grouping of large tech companies expected to benefit from the AI trade -- are currently trading at higher forward price-to-earnings valuations than their five-year averages. The only two trading slightly below their five-year averages are Amazon and Nvidia.

"We've been climbing the wall of worry. People have been saying for a very long time that 'these valuations are too high. These LLMs [large-language models] are neat and interesting but they don't actually make any money,'" Joe Tigay, portfolio manager of the Rational Equity Armor fund, told Barron's.

Wall Street will be looking closely for proof of AI monetization to back up these valuations. From some of the biggest tech companies, this is through accelerating cloud revenue growth -- specifically, Microsoft's Azure public-cloud business, Alphabet's Google Cloud, and Amazon.com's Amazon Web Services. Anything less than beating cloud revenue growth expectations could be a bad sign for these stocks.

These large tech companies have also committed to spending tens of billions of dollars to building AI infrastructure that will provide the computing power needed to accomplish major tasks. Investors will be on the lookout for capital expenditure updates, as these companies continue to invest heavily in AI.

With such elevated evaluations and spending, these companies can't afford to provide weak quarterly financials or disappointing forward-looking guidance, Tigay said. He warns of increased volatility because the stakes are so high.

"When you get these high P/E ratios, we should expect bigger moves when that happens," Tigay said. "We should expect a bigger downfall if there's an earning miss, we should also expect the potential for an earnings beat, with the higher upside to be there too."