He is reacting to Kendrick fans calling him the best lyricist and saying he can outrap anybody. And honestly, this is the only reason Kendrick has any backlash. People go in looking to hear 3stacks or Hov or Nas...or dare I say, young Lupe.
I think this goes to the whole debate over "lyricism". There's the technical definition which concerns itself with the poetic nature of rap (similes, metaphors, alliteration, meter, cadence, etc) and then there's the literal definition which concerns itself purely with what an artist is saying. In the literal sense, what an artist says is just as important if not more important than how they say it. The second definition is less poetry based and moreso prose based. These two definitions are where debates about Pac being just as lyrical as a Big Pun or Canibus might arise. The best artists do both. I used to be a Lupe stan because not only could he make a track like Pen & the Needlez and then make a track like Ghetto Story, but he could combine both styles of lyricism in one song.
No, Kendrick is not seeing Lupe when it comes to that first definition of lyricism. However, Kendrick is very talented with words in the second type of lyricism. Kendrick also doesn't get credit for how talented he is technically when it comes to flowing, multi-syllabic rhyming, internal rhyming, diverse rhyme schemes, etc. Just like Lupe flexes his technical wordplay on tracks like Mean & Vicious, Kendrick flexes his technical skill on a track like Rigamortus.
Here's the really funny thing though: do I think Kendrick could make his own Failure? No, I don't. But I am not in the slightest bit confident Lupe could make his own version of Sing About Me/Dying of Thirst today.