AI-Driven Intrusion: China-aligned Hackers Exploit Supply Chain Gap

The race between digital defenders and attackers just got significantly faster. Microsoft has disclosed that a China-state-aligned threat actor, known as Storm-0940, leveraged an open-source AI framework to launch a sophisticated supply chain attack through the ConnectWise platform.

This operation, detailed in a recent security blog post, saw the group gain unauthorized access to the multi-tenant application. Using stolen ConnectWise credentials, the attackers authenticated as applications rather than human users, allowing them to attempt sign-ins across more than 2,250 Microsoft 365 tenants. In several instances, the intrusion reached privileged access levels in less than three hours from the initial targeting.

The campaign utilized ARTEX, a system of large language model-driven agents designed for autonomous penetration testing. These agents accelerated reconnaissance, scanning, and password spraying efforts. On October 11, the peak of the password spraying activity resulted in over 111,000 failed logon attempts in a single day, with 2,900 attempts per minute at the height of the assault. Despite these brute-force efforts yielding no successes, the automated agents successfully used four specific application credentials to execute over 200 sign-ins within four minutes.

Storm-0940, active since 2021, targeted industries including aerospace, defense, semiconductors, government agencies, and think tanks. Microsoft confirmed that the attack did not stem from a vulnerability in its own systems but rather from the compromised third-party application. The group performed various operations, such as directory changes and identity modifications, with one tenant reporting an app assigning itself a top administrator role on October 15. By October 17, security firm Huntress had confirmed unauthorized sign-in activity for nearly 1,000 tenants.

The use of ARTEX marks a shift in threat tactics, as the framework allows agents to operate continuously with minimal human interaction. While the framework is open-source and can utilize various AI models, recent reports link similar tools to breaches at South Korean financial institutions. In response, ARTEX’s developer announced the project would become closed-source and cease updates. ConnectWise has suspended several cloud services as a precaution and is working on a phased restoration over the coming days.

Microsoft advises customers to keep affected app connections disabled until formal restoration instructions are issued. The company also recommends reviewing activity logs from this month where possible, noting that a successful sign-in does not automatically equate to data exfiltration. The incident highlights the growing speed at which AI-driven agents can move through corporate networks, leaving security teams with less time to detect and respond to threats.