While I own both a PSP and DS, I cannot definitely, beyond a reasonable doubt, support the claim that Nintendo has already lost this portable generation.
Aside from the possibility of a next generation GBA, which would be a conventional gaming device with the power and similar cost to compete directly with the PSP; the DS represents a clear departure from the mainstream videogame media's concept of what constitutes a hardcore gaming device.
The DS is aimed not only at the hardcore gamer, but is focused at those sectors that have not accepted videogaming. While a game like ElectroPlankton may never see a release in the US, I strongly believe that Nintendogs will be released globally. Hence, Nintendo is willing to take chances with creativity with unconventional products for audiences that are not normally thought of as hardcore videogamers.
Women love the touch screen! The demographics of the DS reflect a growing trend of women enjoying gaming. While the Kate and Ashley and Barbie games of old were an attempt to draw women into the videogaming environs, the DS released a date simulator globally!
Don't get me wrong, I enjoy the PSP. Nothing better then being able to watch videos, listen to MP3s, and play a videogame like Lumines. However, I also gave a blast playing WarioWare Touched! and competing against others in Polarium.
While the PSP is clearly the technologically superior multimedia portable product, the DS is a videogaming device that will appeal to a broader videogaming audience.
As always, only time will tell.