AI's contextual understanding has limitations rooted in its reliance on patterns from training data. It struggles with sarcasm, irony, and subtle cues, often misinterpreting them. For example, a statement like "Great job!" might be a sarcastic remark if the context implies otherwise. Additionally, AI lacks common-sense reasoning, making it prone to factual inaccuracies or misjudging situations.

The solution is obvious. Provide explicit context and be clear in prompts. Use unambiguous language and, if needed, specify the tone or intention. Review and refine AI-generated content, adding context, emotion, and cultural sensitivity wherever needed. Also, keep in mind that more and more AI models today are being trained on diverse and representative datasets. As technology advances, AI will certainly get better at contextual understanding, but for now, be sure to recognize its current limitations for achieving nuanced, empathetic communication.