I'm not quite sure what it is from the angle, any chance you could take a photo of the belly side?
From this angle, to me this could be yolk or guts still being outside its stomach cavity.
Is it still making chewing motions with its mouth? If so it might need more time to absorb yolk, and could just need more time left alone in the incubator to finish. Chicks sleep a lot and if it isn't finished hatching (even if already out of the shell) it would not be as active as the others.
If it is guts, odds of survival are low, even if it does it can easily get infected. But I would wait for someone more experienced than me to confirm.
What I would do for now, until we know more, is carefully put its rear end back in its shell if you still have it, put it back in the incubator by itself. Stop cuddling it, it is less likely to get contaminated by whatever bacteria if it stays in the incubator and it may do better with the consistent temperatures and moisture in there.
Oh and newborn chicks don't need food the first few days, so I'd also let it do its thing and not try to feed it just yet.
Congratulations on your hatch and be patient, I know how exciting a first hatch is and how stressful it can be when a birth doesn't go as smoothly as the others! Hang in there
