CrowdStrike’s Darkest Side: 3 Stocks That Could Lose Money

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As our lives become increasingly online and digital workloads migrate to cloud-based environments, cybersecurity is no longer as critical to protecting enterprise and consumer data. The rise of artificial intelligence (Artificial intelligence) and generative AI models that rely on public and even proprietary data strands underscore the importance of a unified cybersecurity apparatus. Interestingly, as enterprises rush to secure their networks, data centers, and cloud environments, they have likely exposed themselves to concentration risk. Many enterprises rely on only a handful of cybersecurity firms to address issues in their digital environments.

CrowdStrike (NASDAQ:CRWD), which provides endpoint security protection for cloud environments, is one of the most well-known names in its industry, with 24% of the endpoint security market to prove it. However, an IT outage in mid-July caused by a faulty code led to a number of disruptions around the world, including airports, banks, and even government offices.

These three stocks could suffer if CrowdStrike crashes

CrowdStrike (CRWD)

CrowdStrike makes the list because it has the most to lose out of any other company. The fact is, the endpoint security company has completely screwed up. According to Bloomberg, a small file led to worldwide disruption. CrowdStrike had a file, dubbed “C-00000291*.sys,” hidden in an update to CrowdStrike’s Falcon sensor product. The corrupted file caused an error in Microsoft“(NASDAQ:MSFT) Windows operating system (Operating system), which eventually caused computers to display the “blue screen of death”.

The cybersecurity disaster highlights the risks of industry consolidation and overreliance on a few products to protect data. CrowdStrike, once a Wall Street darling, continues to crush profits and drive customers away from smaller players like SentinelOne (NYSE:S), and now its share is in a sorry state. Once a rising stock, CRWD shares were up as much as 52% year-on-year, and are now down more than 5% year-on-year.

Moreover, the IT outage will likely prompt customers to continue to seek out similar cybersecurity solutions from CrowdStrike’s competitors.

Microsoft (MSFT)

Microsoft is undoubtedly the next loser in this situation. The CrowdStrike failure has led precisely to the inoperability of the Windows operating system, underscoring how Microsoft has allowed CrowdStrike’s cybersecurity software to be embedded into its wide range of software products. Microsoft has been the subject of criticism and questions about why a third-party product like CrowdStrike’s Falcon has led to the demise of the Windows operating system worldwide. However, Windows is not even close to the extent that Microsoft has encountered CrowdStrike’s products.

Microsoft’s Azure cloud platform also uses Falcon to protect cloud endpoints. But let’s be honest: Large cloud providers tend to use more than one cybersecurity product to implement protections against potential cyber threats. Still, this whole disaster probably comes as a surprise to Azure customers who rely on CrowdStrike’s Falcon for endpoint protection. Because Azure is such a key growth engine for Microsoft’s overall business right now, these cybersecurity failures, whether they were Microsoft’s direct fault or not, cast a shadow over the platform.

Amazon (AMZN)

The last action on this list that would lose out as a result of CrowdStrike’s global IT outage is Amazon (NASDAQ:AMZN). The reason Amazon stock could take a hit is quite similar to the reason Microsoft stock could take a hit. Amazon, in particular, has seen a variety of impacts across its businesses. For example, many Amazon employees noticed that their work emails stopped working on the day of the outage. Additionally, some employees using Windows laptops had the misfortune of seeing the “blue screen of death.” Amazon warehouses have also seen a few disruptions.

Lastly, but probably most importantly, Amazon AWS, the e-commerce giant’s cloud services platform, has seen disruption. AWS is one of the largest cloud platforms in the world, typically trading places with Microsoft Azure for #1 or #2 in global market share. A large platform like AWS, which is also trying to boost its growth amid the AI ​​“craze,” having this kind of global outage could damage Amazon’s reputation with its existing customers or cause customers who were thinking of migrating from on-premises to the cloud to reconsider.

As of the date of publication, Tyrik Torres did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are the author’s own, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication of this article, the editor in charge did not hold (directly or indirectly) any interests in the securities referred to in this article.

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