Alibaba Group Holding Limited (NYSE:BABA) stock buoyed investor optimism with a solid first-quarter beat Thursday as it recuperated from the domestic regulatory crackdown and pandemic restrictions. However, headwinds still blow in the form of the U.S.'s latest embargo on artificial intelligence technology.

The company reported first-quarter FY23 revenue growth of 14% year-on-year to $32.29 billion, beating the consensus of $31.20 billion. Non-GAAP earnings per ADS of $2.40 beat the consensus of $2.02. 

Taobao and Tmall Group revenue grew 12% Y/Y to $15.85 billion. Cloud Intelligence Group increased by 4% Y/Y to $3.47 billion.

Also Read: Chinese Tech Companies Including Alibaba Place Bulk Orders For Nvidia AI Processors, GPUs

Alibaba's net profit jumped over 50%. However, the company acknowledged the inability to fulfill the demand for AI training from clients due to a crisis of critical components like AI chips fueled by U.S. sanctions.

The U.S. banned Chinese firms from Nvidia Corp's (NASDAQ:NVDA) advanced chips, inhibiting attempts to build rivals to OpenAI's ChatGPT. On Wednesday, the U.S. announced new rules to partially limit American firms' investments in China's quantum computing and AI sectors, Bloomberg reports.

Alibaba will focus on developing large language models on which tech companies can build their AI-based tools. 

Daniel Zhang, chairman, and CEO of Alibaba, said that data-driven outfits like internet companies, financial services, and automakers were among the primary targets of Alibaba's cloud-based AI technology. It looks to grow with internet companies, especially mobile internet companies in China.

Chinese tech firms can only purchase A800 chips, which offer slower data transfer rates than A100s.

Price Action: BABA shares traded lower by 2.33% at $96.90 premarket on the last check Friday.

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