I think my advisor may have done this to me. Initially he hired a master's student to "help me" with the project and he told me I would be supervising him. But now he wants the master's student to work on core parts of the project, and he says that since I will be busy this summer, the master's student might be the primary person working on the project.
I am thinking of quitting the project because it looks like I am being replaced. Am I overreacting here?
"Being replaced" is not a good reason to quit. Quit if you cannot perform your responsibilities. Otherwise try to perform them.