CrowdStrike's Role in the Global IT Crash: Musk Deletes Software While Cathie Wood Buys the Dip
Yesterday's massive crash of Microsoft's system caused a significant upheaval across various industries globally, and the capital markets were no exception. Overnight, $CrowdStrike (CRWD.US)$ opened with a 15% drop and eventually closed down by 11.1%, marking the biggest single-day drop since 2022, ending at $304.96, with a total market capitalization of $74.215 billion.
Microsoft also took a hit, dropping nearly 2% at one point, and ultimately closing down by 0.74%, at $437.11, with a total market capitalization of $3.25 trillion.
The large-scale IT failure yesterday caused flight cancellations, market chaos, and disruptions for global businesses. Employees on Wall Street couldn't log into their systems, and a trading desk at Haitong Securities also seemed to be affected. According to flight tracking website FlightAware, as of noon Eastern Time, more than 2,000 flights within, into, or out of the United States were canceled, and over 5,300 flights were delayed. However, as technical issues gradually get resolved, global flights are slowly resuming.
On July 19, local time, the White House stated that President Biden had been briefed on CrowdStrike's massive technical failure, and his team is in contact with CrowdStrike and the affected entities.
This incident has placed CrowdStrike in the public spotlight. After the event, CrowdStrike CEO George Kurtz posted an explanation but did not apologize. He clearly stated that this incident was not a cyberattack, CrowdStrike had identified the problem, and deployed a fix. According to a statement from CrowdStrike's website, on July 19, CrowdStrike released a sensor configuration update to Windows systems, triggering a logic error that led to system crashes and blue screens.
Additionally, risk, strategy, and human capital consulting firm Marsh & McLennan Cos Inc. (MMC) expects that more than 75 customers may file network failure claims due to CrowdStrike's global crash incident.
CrowdStrike's main business is security systems, protecting enterprises from ransomware attacks, primarily serving corporate clients rather than individual users, thus having low public awareness. Market research firm IDC data shows that in the $12.6 billion global endpoint protection software market, CrowdStrike holds about 18% of the share, second only to competitor Microsoft's 25.8% market share.
CrowdStrike's fundamentals are solid. In the first quarter of fiscal 2025, CrowdStrike's revenue was $921 million, a year-over-year increase of 33%; non-GAAP diluted earnings per share were $0.93, a year-over-year increase of 63%.
After the stock price plummeted, Cathie Wood's ARK Investment Management sold 88,545 shares of Roblox, 17,607 shares of Tesla, and 16,758 shares of Coinbase, while buying 38,595 shares of CrowdStrike.
Elon Musk was also affected, with Tesla suspending some production lines due to the global IT technical failure. According to media reports, Tesla's Gigafactories in Austin, Texas, and Nevada sent some workers home early, and the affected workers have yet to be notified when production will resume.
A user on X asked Musk whether CrowdStrike had been deleted from all his companies' computers, including SpaceX, Tesla, X, xAI, The Boring Company, and Neuralink. Musk responded that they had indeed deleted CrowdStrike from all systems. He also warned that this IT disruption would cripple the automotive supply chain.