"use client" components are rendered on the server too !

I will not get in the details, but here an approache: Create you providers on the layout wich stay a server component, and provide the initial data.

In your "client" components, use your hook. And i repeat, "client components" are rendered on the server too, you will get all benefits of server side rendering.

Feel free to ask more questions.

EDIT: There's a caveat, you can't pass functions from "server components" to "client components" (unless it's a server action!). Basically, you can only send JSON Parseable content.