2022 M2 MacBook losing connection to built-in display when sleeping, throws kernel panic error and restarts

Whenever my MacBook goes to sleep (either after idling for a while or me actually pressing the 'sleep' button), it loses connection to the display and throws a kernel panic error, restarting the entire system.

It isn't intermittent, it happens every single time without fail.

The start of the error code I get is:

panic(cpu 2 caller 0xfffffe00293a92a8): DCP PANIC - ASSERT!AppleDCPDPTXPowerController.cpp:538 No device added after powering on the rails. HPD=0 - dcpav(27)
ASSERT!AppleDCPDPTXPowerController.cpp:538 No device added after powering on the rails. HPD=0

I fully wiped the hard drive (deleted the Macintosh HD volume and then reinstalled the OS), and it didn't help. When I first activated the machine it allowed me to wake it with the keyboard not the trackpad, but the keyboard trick stopped working fairly soon after as well.

Does it seem like a hardware issue if deleting the entire volume and reinstalling the OS didn't fix it? The error started again before I reinstalled any third-party software on the fresh disk. I also tried booting in safe mode, didn't help either.