I’m not very familiar with touchbar build, but I’d say you’re definitely right, looks like a hardware issue. Hard to tell if it ‘s the touchbar itself or some circuit feeding power/data to it. I’m afraid Apple would charge an arm and a leg to fix that. The other alternative would be find some independent lab into component level repairs but that’s not going to be very cheap either. It’s a bit alarming such a thing may happen on a less than 2 years old machine.