The old transaction is valid. The new transaction is also valid. Both remain completely valid and either can be mined, right up to the point where one of them is included in a block.
Take note that as long as none of transactions have been confirmed, both are valid.
Thanks for the info, that leads to my follow-up question.
What are the odds of both transactions being included in the same block? If both transactions are valid then both transactions can be included in the same block too if the fee is used in the same range then what happens?