China-Linked Storm-0940 Actor Leverages AI Framework for Supply Chain Attacks
Microsoft has revealed that a China state-aligned hacking group, known as Storm-0940, was behind the recent supply chain compromise affecting the ConnectWise Cloud Backup application. The threat actor employed ARTEX, a Go-based agentic AI penetration testing framework, to significantly speed up its malicious activities, including scanning, reconnaissance, password spraying, and the abuse of OAuth applications against downstream victims.
According to Microsoft, Storm-0940 used ARTEX at "machine speed" to automate attacks targeting hundreds of organizations across a wide array of sectors since September 2026. These sectors span aerospace and defense, automotive, chemicals, energy, financial services, government, legal, manufacturing, media, military, semiconductor, software, technology, and non-profits. The use of ARTEX allowed the threat actor to authenticate to target environments through already-granted application access, bypassing the need for interactive user sign-ins. This AI-accelerated activity included reconnaissance, credential modifications, and attempts to escalate privileges for expanded or persistent access.
Details of the Attack
Storm-0940, first detailed by Microsoft in November 2024, has been active since at least 2021, previously leveraging a botnet called Quad7 (aka CovertNetwork-1658) for evasive password spray attacks. The group typically exploits internet-facing applications for initial access, then uses compromised accounts for lateral movement. A key tactic observed is establishing persistence by adding credentials to existing OAuth applications within cloud infrastructures to maintain access to Microsoft 365 resources.
Microsoft noted that ARTEX-driven attacks have frequently resulted in adversaries gaining privileged access to cloud infrastructure, with some instances seeing the transition from initial targeting to privileged access in under three hours. Between October 10 and 14, 2026, Storm-0940 infrastructure was observed conducting an automated cross-tenant password-spray campaign targeting 327 accounts across eight organizations, aiming for access to Microsoft 365 and Exchange Online. During this period, Microsoft recorded over 151,000 failed logon events, peaking on October 11 with 2,900 failures per minute.
AI Agents Gain Control
On October 15, 2026, the situation escalated as AI agents gained control of the identities of multiple ConnectWise cloud applications. These agents then used the compromised application identities to authenticate to customer environments, leveraging the established trust associated with these applications. "After acquiring control of the identities of multiple ConnectWise cloud applications, the AI agents operating on behalf of the threat actor continued to use the same IP range to authenticate to customer environments using the illicit access acquired through these stolen app credentials, effectively taking advantage of the already established trust by these apps within a tenant," Microsoft stated.
In some cases, these AI agents progressed beyond authentication to Microsoft Graph and directory operations, engaging in reconnaissance, modifying application credentials for persistence, and altering identities, groups, and privileged roles. "The application credential modification made by Storm-0940’s associated agents in the targeted victims' environments can lead to persistence through other identities, credentials, and cloud services," Microsoft warned. "These changes can remain active as a backdoor even after the original compromised application is mediated."
Broader Implications and Response
Storm-0940 is not the only actor weaponizing ARTEX; Microsoft has observed its use by threat actors globally. This trend underscores the increasing integration of agentic AI tools into offensive security workflows, enabling attacks at unprecedented scale and speed. "Agents are not constrained by factors affecting humans – they can work around the clock, on weekends, and on holidays and attempt multiple breach paths simultaneously, enabling significantly reduced time from selecting a target to achieving objectives, increasing the speed and impact of complex attacks like supply chain compromises," Microsoft explained.
In response, ConnectWise acknowledged that the campaign "reaches well beyond any one company," emphasizing that "nation-state actors are increasingly targeting the software supply chain, because one trusted connection can open the door to many organizations." The company added, "AI now lets them test those connections at [...] 'machine speed.' MSPs are in the middle of that chain. They are targets in their own right, and they are also a path into every client they serve. Every vendor and every MSP must defend itself with both of those risks in mind." ConnectWise, which temporarily halted services, has been in the process of restoring them in phases.
