setValue is not defined in react for react hooks

Restructure code as below and try,

import React, {useState} from "react"; 

export default function App() {
  const updateAPI = () => {
    setValue("test"); 
  }

  const [value, setValue] = useState(""); 
  return (
    <div className="App">
      <h1>Hello CodeSandbox</h1>
      <h2>Start editing to see some magic happen!</h2>
      <button onClick={updateAPI}>HI</button>
      <p>{value}</p>
    </div>
  );
}

your updateAPI function cant find setValue useState hook because they are not in the same scope.

import React, {useState} from "react"; 


export default function App() {
   const [value, setValue] = useState(""); 

 const updateAPI = () => {
   setValue("test"); 
 }
 return (
   <div className="App">
      <h1>Hello CodeSandbox</h1>
      <h2>Start editing to see some magic happen!</h2>
      <button onClick={updateAPI}></button>
      <p>{value}</p>
    </div>
 );
}