The Nasdaq Composite has plunged deep into bear market territory, dragged down by deteriorating investor sentiment in the face of high inflation and rising interest rates. In fact, the tech-heavy index is now 34% off its high, marking its steepest decline in the last decade.

On the bright side, that broad downturn has created a wealth of buying opportunities for patient investors. For instance, in spite of temporary macroeconomic headwinds, the future looks bright for Microsoft (MSFT 0.23%) and Arista Networks (ANET -0.17%), and both stocks are trading at discounted valuations compared to historical price-to-earnings multiples.

Microsoft: An arsenal of critical software and cloud services  

Microsoft breaks its operations into three segments, each packed with widely adopted products. The first is Productivity and Business Processes, at the heart of which is Microsoft 365, the most popular collection of enterprise applications on the planet. In addition to the well-known Office software suite, Microsoft 365 includes market-leading products like Defender and Azure Active Directory for cybersecurity, and Microsoft Teams for communications.

The second segment is Intelligent Cloud, which houses Microsoft SQL Server, the third-most-popular database. But cloud computing platform Microsoft Azure is the heart of this segment. Azure captured 21% market share in cloud infrastructure services in the second quarter, second only to Amazon Web Services. 

The final segment is More Personal Computing, which features Xbox hardware and content, the ubiquitous Windows operating system, and the Bing search engine. But the most exciting part of this segment is advertising. Last year, Microsoft acquired ad tech platform Xandr from AT&T, and Netflix recently selected Microsoft as the ad tech vendor that will power its soon-to-launch ad-supported streaming service.

Broadly speaking, Microsoft's arsenal of critical software products and cloud services makes it resilient, and that advantage has helped the company churn out solid financial results in spite of the difficult economic environment. Over the past year, revenue rose 18% to $198 billion, while free cash flow ticked up 16% to $65 billion. But Microsoft still has room to expand, especially in cybersecurity, cloud computing, and digital advertising.

In fact, the cybersecurity market will grow 12% annually to reach $500 billion by 2030, while the cloud computing market will grow 16% annually to reach $1.5 trillion, according to Grand View Research. Meanwhile, online video advertising spend will increase 14% annually to reach $362 billion by 2027, according to Omdia. Netflix is expected to be a key player in that market, which bodes well for Microsoft.

Currently, Microsoft stock is 32% off its high, and shares trade at 23.7 times earnings, a bargain compared to its five-year average of 35.1 times earnings. That's why investors may regret passing on this growth stock.

Arista Networks: Technology that powers the cloud

Arista has become the gold standard in high-speed data center networking. Its portfolio includes switching and routing platforms, wireless access points, and adjacent software for network automation, monitoring, and security. Those technologies allow customers to deploy a seamless network across public clouds, private clouds, and enterprise campus environments.

Arista says its principal innovation is the Extensible Operating System (EOS), the uniquely programmable software that runs across every piece of its hardware. That programmability makes Arista's networking platforms very flexible, allowing customers to easily integrate and deploy third-party applications. Additionally, by running a single version of EOS across every switch and router, Arista makes network management less complex and costly compared to vendors like Cisco, which requires customers to run different versions of multiple operating systems across its hardware.

In short, Arista's networking platforms offer industry-leading speed and power efficiency at a lower total cost of ownership. Those selling points have helped it win more than 8,000 customers, including cloud computing giants like Microsoft and Meta Platforms. In turn, Arista has delivered solid financial results on a relatively consistent basis. Revenue climbed 33% to $3.5 billion over the past year, and earnings soared 41% to $3.24 per diluted share.

Looking ahead, Arista is well positioned to maintain that momentum. Data centers will need faster networks to support the ongoing adoption of cloud computing, the growing number of connected devices (e.g. the Internet of Things), and the development of data-intensive applications (e.g. artificial intelligence). That should drive demand for Arista's networking products in the coming years. In fact, management says its addressable market will grow from $23 billion in 2021 to $35 billion by 2025.

Currently, Arista stock is down 27% from its high, and shares trade at 30.8 times earnings, a slight discount to its three-year average of 33.5 times earnings. That's why this growth stock looks like a buy right now.