Chinese Hackers Use AI Agents to Hit Microsoft Cloud Users

A significant cyberattack is currently unfolding across the technology sector, driven by advanced artificial intelligence tools. Microsoft revealed on its security blog that a China-aligned hacker group known as Storm-0940 executed a large-scale supply chain attack. This incident highlights how modern cyber threats are evolving to use automation for speed and scale. The group targeted a popular multi-tenant application called ConnectWise, which serves as a bridge to numerous corporate networks.

The attackers utilized ARTEX, an open-source framework that employs AI agents for autonomous penetration testing. These digital agents acted with minimal human input, allowing them to work around the clock. This rapid pace left defenders with very little time to detect and respond to the intrusion. The use of these automated agents accelerated scanning, reconnaissance, and the abuse of application credentials. It is not yet clear exactly how many tenants were fully compromised or how the initial credentials were stolen.

The scale of the operation was massive, with the group attempting sign-ins at more than 2,250 Microsoft 365 tenants. They used stolen ConnectWise application credentials to authenticate without any interactive user login. In some cases, the attackers reached privileged access levels in under three hours. Additionally, the group conducted password spraying campaigns against 327 accounts across eight organizations. This resulted in over 151,000 failed login attempts, with no successful breaches reported from that specific tactic.

At the peak of the attack on October 11, the password spraying reached a rate of 2,900 attempts per minute. More than 111,000 failures were recorded that single day, with nearly 98 percent of the activity leading to lockouts. However, the AI agents successfully signed into customer tenants using four specific application credentials. They achieved over 200 sign-ins in under four minutes from the same IP range. Within these tenants, the attackers performed directory operations, changed app credentials, and modified privileged roles.

Security firm Huntress observed one tenant where an app added itself to the top administrator role on October 15. This behavior triggered specific alerts from Microsoft Defender. The attackers also planted new secrets set to expire in 2028. By October 16, Huntress confirmed unauthorized sign-ins for 162 tenants. The following day, nearly 1,000 tenants showed activity from the attacking IP, with more than 300 sign-ins succeeding. The orderly sweep through tenants suggested a script working from a predefined target list.

The targeted industries included aerospace, defense, semiconductors, government, and think tanks. Microsoft clarified that the attack did not stem from a vulnerability in its own systems or products. ConnectWise suspended several of its cloud services as a precaution and began a phased restoration process. Recovery is expected to take several days, with no current indicators that partner backup data was compromised. The developer of the ARTEX framework stated the project would no longer be updated and would become closed source.

This incident marks a shift in how traditional attacks are conducted by leveraging open-source AI pentest tools. Threat actors in multiple regions are now using this technology, including recent breaches at South Korean financial institutions. Microsoft advises customers to keep affected app connections disabled until formal restoration instructions are issued. They also recommend reviewing activity logs from this month where possible to assess potential exposure.