Investors MUST Know This Before Buying the CrowdStrike Stock Dip! CRWD and Microsoft Service Outage

Investors have been talking about buying the dip on CrowdStrike stock after the outage this weekend. It could indeed be an opportunity. But investors really need to know a couple items before doing so. On this episode of Chip Stock Investor cybersecurity edition, we discuss the implications for investors from both a business and portfolio construction perspective. Learn how insurance companies, like Berkshire Hathaway, actually play a crucial role in cyber risk management. Plus, get insights into the balance between investing in high-growth and more "boring" investments.

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Chapters:
00:00 Introduction: Software Updates and CrowdStrike
00:33 CrowdStrike's Role in Cybersecurity
02:32 The Falcon Sensor Update Issue
04:05 Impact and Risks of the Outage
07:13 CrowdStrike's Response and Future Outlook
10:21 Cybersecurity Insurance Insights
15:55 Berkshire Hathaway's Investment Strategy
18:52 Conclusion and Membership Information

Nick and Kasey own shares of CrowdStrike and BRK.B

[riffsoffov]

Technically, Microsoft tests and certifies Crowdstrike's code, but that's probably too slow for responding to malware, so Crowdstrike bypasses the process by updating definition files that the certified code reads. The code is set up as a driver, even though there's no hardware device for it to drive. Being a driver means it's not an application that could fail without bringing the system down, instead it's part of the kernel (i.e. system software). That's so that it can get access to info that an application wouldn't get. It's marked as a "boot-start driver", which means that once it's on a PC, the PC can't start without it, except in safe mode. It's speculated that the definition files could contain p-code, which means the driver acts like a code interpreter, which means the source code (the p-code in the definition files) is executed on-the-fly (instead of being compiled to executable object code). But that's only speculation so far as I know. My info is from retired Microsoft software engineer "Dave's Garage", and I suggest finding the source rather than relying on this comment. He thinks it's likely that Crowdstrike's driver has inadequate error checking and parameter checking of the definition files. Maybe Microsoft could be criticized for not having a class of boot-start drivers that get their status revoked if they cause failure on successive startup attempts (just my own thought).

[loganlasvegas]

Great recap and comments. Longtime shareholder and fan of CRWD, but I agree they got too arrogant and careless. I recall Kurtz was kind of an ass irt PANW’s replatforming strategy few months ago, ridiculing them that PANW had to give away products. "free is not free" and "good enough is not enough" he said. Kind of took a victory lap on PANW’s bad ER and stock drop. Now he’s on the hot seat and eating crow. What comes around goes around.

[stevend.bennett]

It was tempting to jump into the roller coaster car of CRWD stock on Friday, but as we see today ($275 and falling at 6:50 pt) there is a ways to hit the bottom, which I’m guessing to be $220. Good time to dollar cost average down.

[jr]

Wow, very, very awesome insights in CrWD and the ripple effects of the recent incident into other sectors. Thank you for providing a comprehensive view.🎉❤

[hocstix]

You never gave clarification as if and when to buy Crowdstrike. Very disappointing - CYA .

[cyfrowymuza]

guys i really value your channel and come back regularly for all the info you share about semis etc. but this time you fall into this trap as many other people who do not have experience in software engineering or system administration and you unfortunately spread misinformation and incorrect information - i wanted to make a much longer comment but i highly recommend you watch Dave's Garage episode "CrowdStrike IT Outage Explained by a Windows Developer" and you will understand the problem - this is not MSFT problem, this is not Windows problem, this is purely CRWD problem, they caused this outage and only they. BSOD is the only way the OS could react in this situation.

[WyattCounterman]

Good comment about de-worse-ification. Well explained. Thanks guys!

[flaggenmensch]

The Falcon Platform is the word leading product for end point security, therefore it is used globally by all industries. Who should replace them? There is a strong demand for such products since the risks become bigger every year. I am sure that Crowdstrike will come back stronger as before because they will learn from this damage and get even more customers who will pay. This will make the company's brand even more known and likely attract new customers in the future.

[sirus]

I went through a hack/outage with a software company. The issue was all the top talent left the company due to the stigma of being associated with them. It slowly became a mess. I use to see so many people wearing Crowdstrike hats/shirts at my gym. They aren't wearing them anymore lol Does lightning strike twice? who knows....but now you can BET they will be facing brain drain and that is scary given how incompetent they were!

[Flogervideo]

Excellent review, thanks for enlightening us!

[shannonoliver]

Great update! I’m a big believer in the barbell approach. Is there an ETF that meets your expectation as a barbell to VUG or VGT? While Berkshire isn’t an ETF, it could probably work because it holds so many non-correlated tech assets. ???

[Reza_Audio]

all the computers of amazon facilities got that blue page screens. that was a global issue for 4 hours

[Wanwan-mqjw]

Really great !! Thanks for the good work

[dondonnysson]

I guess it is impossible to evaluate as of know at what price CRWD should be trading at. The uncertainity surrounding the future of CRWD is massive. However, when it seems like the stock has bottomed reactively to the news, it might become a buying opportunity if the damage to CRWD is not that bad in the long term and CRWD gets their shit together and never lets something like this happen again. Very risky to buy for sure but the market usually assumes the worst when it comes to scandals like this. Even Equifax survived and trades at all time highs now.

[Gru]

Worst case scenario is CRWD starts losing corporate customers. I even heard Elon Musk is discontinuing using them. Be careful. Either stay away of it now until the dust settles, or short it

[Matthewbyrd]

I don't want to sound like a broken record because I've brought this up before - but I wonder if you all might be interested in commenting on some forgotten semiconductor names, namely those specializing in IoT - SYNA and SLAB are a couple that come to mind. I think it's interesting that JPMorgan recently initiated coverage on them as overweight - thesis boils down to IoT growth outpacing overall semi growth in the coming years along with an upcoming cyclical recovery.

[azulsimmons]

I am wondering about the litigation myself. A lot of money was lost. Someone will have to pay something.

[yago]

What you think about semtech technology? Do you think it it would be worth covering it on your channel?

[gsk]

i mean to say msft stock has not suufered from the debacle. how long crwd stock will take to reocver and are the insurances on earnings of crwdstrike. thanks

[gsk]

accrding to your narration, sft is equalt reposnible fr tis debacke but its sare ave not suffered at all.