useState hook setter incorrectly overwrites state

Welcome to the closure hell. This issue happens because whenever setState is called, state gets a new memory reference, but the functions changeValue1 and changeValue2, because of closure, keep the old initial state reference.

A solution to ensure the setState from changeValue1 and changeValue2 gets the latest state is by using a callback (having the previous state as a parameter):

import React, { useState } from "react";

const Test = () => {
  const [state, setState] = useState({
    value1: "1",
    value2: "2"
  });

  const changeValue1 = () => {
    setState((prevState) => ({ ...prevState, value1: "new 1" }));
  };
  const changeValue2 = () => {
    setState((prevState) => ({ ...prevState, value2: "new 2" }));
  };

  // ...
};

You can find a broader discussion about this closure issue here and here.

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