It didnt request new funding for the project which is, as you said, effectively cancelling it
However note that this is the US Navy budget request
Ultimately it is AFAIK the Congress which will decide if it will fund it or not
Personally I am 50-50 on this. Congress might feel nervous about cancelling such a "high-profile" R&D program when the Chinese are still working on it. It might ultimately decide to keep funding this, to avoid conceding the whole ground on China.
IMO if the US Navy truly wants this to be done as they wish, they will have to extensively explain to Congress why they are cancelling it when the Chinese are not
What if the Chinese pull its version of SDI and make a bunch of flashy projects knowing that the US will blow money on them?