Microsoft Warns of China-Linked Hackers Using AI in Supply Chain Attacks

"Storm-0940's use of ARTEX accelerated the speed of compromised application abuse to authenticate to target environments through applications that had already been granted access, allowing the threat actor to operate without requiring an interactive user sign-in," Microsoft said.

Microsoft: China-aligned Storm-0940 used ARTEX to scale attacks

Microsoft disclosed that a China state-aligned actor it calls Storm-0940 was responsible for the recent supply chain compromise of the ConnectWise Cloud Backup application. During the incident, the company said, Storm-0940 used ARTEX — described in Microsoft’s advisory as a Go-based, agentic AI penetration testing framework that was made closed-source after prior abuse against South Korean financial institutions — to speed scanning and reconnaissance, password spraying, and OAuth application abuse at downstream victims.

Microsoft said the actor used ARTEX "at machine speed" to automate activity and that that automation targeted hundreds of organizations worldwide across a broad range of sectors since September 2026.

Scale, pace, and sectors targeted

Microsoft listed the sectors targeted in ARTEX-driven campaigns to include aerospace and defense, automotive, chemicals, energy, financial services, government, legal, manufacturing, media, military, semiconductor, software, technology, and think tanks and non-profits. In the ConnectWise-specific activity, the company observed ARTEX-driven sign-in attempts at a pace it said gives defenders a short window to detect and respond.

October timeline: failed logons, credential theft, and escalation

Between October 10 and 14, 2026, Microsoft reported that infrastructure associated with Storm-0940 at 144.172.64[.]99 conducted an automated cross-tenant password-spray campaign targeting 327 accounts across eight organizations to gain access to Microsoft 365 and Exchange Online. During that window Microsoft captured over 151,000 failed logon events; the activity peaked on October 11 at 2,900 failures per minute, producing more than 111,000 failures in a single day. Forty-eight accounts received more than 1,000 failures each. Microsoft said no successful authentication, token issuance, Graph call, or directory change was detected during that October 10–14 window.

That changed on October 15, when Microsoft said ARTEX agents gained access to the identities of multiple ConnectWise cloud applications and began using those app identities to authenticate to customer environments. The company added that after acquiring control of those app identities, the agents continued to authenticate to customer environments using the same IP range and the illicit app credentials, "effectively taking advantage of the already established trust by these apps within a tenant."

In some victims, Microsoft assessed that agents progressed beyond authentication to Microsoft Graph and directory operations, performing reconnaissance, modifying application credentials to establish persistence, and changing identities, groups, and privileged roles. Microsoft warned that such application credential modification "can lead to persistence through other identities, credentials, and cloud services" and that these changes "can remain active as a backdoor even after the original compromised application is mediated."

The tech giant also said that a portion of ARTEX-driven attacks resulted in privileged access to cloud infrastructure, and that in several instances the time from initial targeting to privileged access was less than three hours.

ConnectWise: supply chain reach and phased restoration

ConnectWise confirmed the activity and said the campaign "reaches well beyond any one company," warning that "nation-state actors are increasingly targeting the software supply chain, because one trusted connection can open the door to many organizations." The company said that "AI now lets them test those connections at [...] 'machine speed.'"

ConnectWise temporarily shut down services following the attacks and has been restoring services in phases; the company said the restoration process will take several days. In its public comments ConnectWise emphasized that managed service providers (MSPs) are both targets themselves and a path into every client they serve.

Quad7, wider ARTEX adoption, and the agentic-AI trend

Microsoft noted that Storm-0940 was first detailed by the company in November 2024 and has been assessed as active since at least 2021. The adversary has earlier leveraged a botnet called Quad7 (aka CovertNetwork-1658) to carry out highly evasive password spray attacks. Microsoft added that Storm-0940 is not the only group weaponizing ARTEX — the company has observed threat actors across multiple geographic regions using the same framework.

Microsoft framed the broader concern succinctly: 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 faster and more numerous breach attempts and increasing the speed and impact of complex attacks like supply chain compromises.

What this means for MSPs, security teams, and customers

• MSPs: ConnectWise warned that MSPs sit "in the middle of that chain" — they are targets in their own right and a pathway into every client they serve, meaning a compromised MSP-facing application can provide adversaries with broad downstream access.
• Security teams: Microsoft’s telemetry shows defenders a short detection window against machine-speed agents; defenders should note that attacks moved from mass failed logons to stolen app identity abuse and then to Graph and directory operations in days, and that credential changes can persist as backdoors even after an initial mitigation.
• Customers of affected vendors: Because stolen application identities can be used to authenticate without interactive sign-in, organizations should be aware that existing trust relationships for third-party cloud applications can be abused to reach tenant resources.

The incident lays out a stark technical chain: automated agents rapidly test credentials and OAuth trust, seize app identities, and then exploit those identities to operate within tenant environments — in some cases gaining privileged access in hours. Microsoft and ConnectWise have disclosed the activity and are responding; ConnectWise is restoring services in phases and Microsoft continues to characterize the attacker and tooling. For organizations that rely on third-party cloud applications and MSPs, the episode is a concrete example of how AI-accelerated tooling can transform a single supply chain compromise into a multi-tenant threat.

Original reporting: https://thehackernews.com/2026/10/china-linked-hackers-use-artex-ai.html