If 2022 ended right now, it would be the worst year for the stock market since the financial system collapsed in the subprime mortgage crisis of 2008. But in the technology sector specifically, many individual stocks have experienced even greater declines, reaching a magnitude not seen since the tech bubble burst in 2000.

As of this writing, the tech-heavy Nasdaq-100 index is down 28% year to date, though that's a modest decline compared to many formerly high-flying companies that have shed 50% (or more) of their value in 2022.

Below are two of the worst performers, which have each crumbled by 87%. But the headwinds that plagued these companies throughout this year might ease in 2023, which could lead to a strong rebound in their respective stocks. 

1. Upstart could return to growth as inflation subsides

2022 hasn't been a good year to be in the lending business, particularly for financial technology company Upstart Holdings (UPST 0.82%). It has built an algorithm powered by artificial intelligence (AI) that can analyze 1,600 data points on a potential borrower to provide a more accurate measure of creditworthiness than traditional metrics like Fair Isaac's FICO credit scoring system. 

It uses the algorithm to originate loans for banks, credit unions, and car dealerships. But the company's model was developed during a strong economy, and investors are concerned that it isn't battle-tested for a recession or even a downturn like the one we're currently experiencing. 

Between 2020 and 2021, Upstart's revenue rocketed by 264% to $849 million as consumer demand for credit soared with interest rates at rock bottom. But this year, analysts expect revenue to suffer a 2% decline to $830 million -- though that's not necessarily a bad result given the current economy.

Despite Upstart's financial results taking a breather, it's still making operational progress. For example, in the third quarter (ended Sept. 30), it reported that a record-high 83 bank and credit union partners, plus 702 car dealerships, were signed on to use its AI-driven loan origination platforms. Those figures were up a whopping 167% for banks and credit unions and 141% for auto dealerships year over year, which signals robust demand for the technology. 

Credit markets do remain challenged, though, and Upstart continues to see difficulties finding buyers for its loans. But there are some early signs that inflation peaked in June, which means the U.S. Federal Reserve might soon halt its aggressive interest rate hikes. If that happens, 2023 should look far more positive than 2022 for Upstart. 

The 87% year-to-date decline in Upstart stock places it at a price-to-sales (P/S) ratio of just 1.7 based on the company's current valuation of $1.5 billion, and analysts' $855 million revenue target. But minus the $683.9 million in cash on its balance sheet, its P/S ratio is an even cheaper 0.9.

That's a rock-bottom valuation, and it is possible Upstart stock will recoup some of its losses if the economy turns in its favor in the new year. 

2. Advertisers could come running back to Snap when the economy recovers

This has also been a bad year for companies reliant on advertising to generate revenue, and social media companies like Snap (SNAP 0.26%) are certainly feeling the pinch. High inflation plus high interest rates equals weak consumer spending. Hence, businesses spend less money marketing their products to those consumers, because their return on that investment will probably be much smaller. 

As a result, Snap's revenue grew by just 5% year over year in the recent third quarter of 2022 (ended Sept. 30), and it was 13% lower than the company's peak quarterly revenue of $1.29 billion set in the fourth quarter of 2021. That's not what investors want to see from a once fast-growing technology company.

But there was a silver lining to Snap's recent results. Its daily active users jumped by an impressive 19% to 363 million. And while that isn't necessarily bearing fruit right now, Snap will have a much larger user base to monetize when the economy recovers.

Plus, across 20 different countries where Snap operates, it says it reaches 75% of the population 13 to 34 years old. That young audience is highly coveted among advertisers, particularly for goods like apparel. In fact, Snap is investing heavily in augmented reality (AR) that can turn a user's smartphone into a virtual fitting room. 

One retailer generated 11 million impressions during the third quarter through that technology, and Snap says over 250 million users are engaging with different AR experiences daily. It adds a new dimension for advertisers trying to keep younger customers engaged, and Snap is a market leader in the space. 

Like Upstart, the 87% decline in Snap stock places it near a rock-bottom valuation. In fact, it trades near the cheapest P/S ratio since it listed publicly. But the company will be primed for a rebound next year if the economy recovers, because advertisers are always looking for opportunities to connect with young audiences. Snap is a go-to platform on that front.