1) Some students who started chanting USA could have meant to insult, but the rest who joined in did not meant as an insult
2) Chanting USA is a regular thing they do at basketball games
1 is possible and probable, while 2 is possible but highly unlikely. I used to teach high school, and I've been to many different school games and never was that a chant that was done, and I have never heard that used in the same way in any school function.
The ONLY times I have ever heard USA as a chant at similar events were on WWF/WWE or during Olympic sporting events.