By Greg Lai and Alex Hsiao, Co-Chief Investment Officers
On July 19, 2024, a sudden technological disaster swept the globe, causing millions of Windows computers to crash with blue screens, leaving users in turmoil. The impact of this incident was extensive, affecting a wide range of sectors from airports to banks, medical institutions to hotels, and multinational companies to individual users. Almost every area utilizing Windows systems was not spared.
In the United States, major airlines like American Airlines, Delta Air Lines, and United Airlines were forced to suspend flights due to system crashes, leaving numerous passengers stranded. Key infrastructures such as the London Stock Exchange in the UK, Amsterdam International Airport in the Netherlands, and Singapore Changi Airport also experienced frequent flight delays and check-in failures. Additionally, the European banking system, Australian public service agencies, and many companies and individual users worldwide suffered varying degrees of losses. Microsoft’s 365 services were also affected, with its cloud storage service OneDrive and email service Outlook experiencing outages, further exacerbating the chaos. In Australia, nearly all public places and service agencies using Windows systems were affected, causing significant disruptions to daily life.
The “culprit” of this incident was eventually identified as a defective software update released by the cybersecurity company CrowdStrike. At 04:09 UTC on that day, CrowdStrike issued a content configuration update for Windows sensors as part of its routine operations aimed at collecting telemetry data on new threat technologies. However, an undetected error within this update accidentally triggered the crash of the Windows system. Specifically, the affected devices were mainly Windows hosts running sensor versions 7.11 and above, which were online and received the update between 04:09 and 05:27 UTC. Fortunately, the flaw in the content update was quickly fixed by 05:27 UTC, but by then, a significant number of systems had already crashed.
This technological disaster caused significant trouble for users worldwide and triggered substantial fluctuations in the stock market. CrowdStrike’s stock price plummeted by over $50 at the market’s opening on July 19, significantly reducing its market value. Since then, its stock price has continued to fall, reflecting the market’s serious dissatisfaction with the company’s mistake. Meanwhile, CrowdStrike’s competitors, such as SentinelOne and Palo Alto Networks, have benefited from the situation. SentinelOne’s stock price rose significantly following the incident, with the market generally believing it might seize the opportunity to expand its market share. Although Palo Alto Networks experienced a more moderate increase, it still demonstrated investor confidence in its future growth. Microsoft, as the supplier of the Windows system, temporarily became a “scapegoat” despite not being at fault in this incident. Its stock price fell by nearly 2% at the market’s opening on July 19. However, as the situation was clarified and recovery measures were implemented, the stock price gradually stabilized.
This incident underscores the deep integration of the global economy and how a single technological failure can have widespread repercussions. The cascading effects of this outage highlight the interconnected nature of modern infrastructure and the fragility of relying heavily on digital systems. The financial world’s immediate reaction, with sharp declines in stock prices, reflects how investor sentiment is highly sensitive to technological stability. In a globally connected marketplace, the ramifications of such disruptions extend far beyond the initial technical failure, influencing markets, investor confidence, and economic activities worldwide. This event serves as a stark reminder of the critical need for robust cybersecurity measures and contingency planning to safeguard against future incidents and maintain the stability of our interconnected world.
Footnote: Reprinted and revised with permission from Rayliant Investment Research in partnership with Affinity Investment Advisors.
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