That's like asking, "Which is worse, Death or Taxes?"
More seriously, probably cold welds lead to more sudden, catastrophic failures. Undercut can happen wiht a properly fused, otherwise sound weld. What undercut does is reduce the base metal thickness right at the toe line of a weld. This creates a notch, a stress concentrator. While this notch can lead to sudden, catastrophic failure; it's much more likely that the notch enables fatigue to occur. Fatigue cracks are slow, progressive damage, until they grow so large that the stress applied causes them to fail.
Of the two problems, I'll take undercut as I'm more likely to see the crack that grows from it before something really bad happens. A cold weld with lack of fusion, particularly a single pass fillet weld, can let go if you look at it or use harsh language where it can hear you. I think this a much greater threat.
