I cannot set undefined type for fetched data by useMutation

Question

I want to store fetched data using useState as below, but it seems something in not working with types, logic is kept in Context, data is fetched from API

const {
        lineSectionsDefectsDetailsData,
        getLineSectionsDefectsDetailsData,
    } = useContext(LineSectionsContext);

    const [data, setData] = useState<
            LineSectionsDefectWarningDetailsType | undefined
        >();
    
        useEffect(() => {
            setData(lineSectionsDefectsDetailsData);
        }, [lineSectionsDefectsDetailsData]);

This is the error I get from typescript:

const lineSectionsDefectsDetailsData: LineSectionsDefectWarningDetailsType[] Argument of type 'LineSectionsDefectWarningDetailsType[]' is not assignable to parameter of type 'SetStateAction<LineSectionsDefectWarningDetailsType | undefined>'.ts(2345)

What is also strange to me is that when I create Context interface and write:

lineSectionsDefectsDetailsData: LineSectionsDefectsDetailsType[] | undefined;

but when I press ctrl+s VSC saves it like in below picture which I think might also create some issue, also it's strange behaviour.

what is the issue and how to type initial undefined type?