I think you start by building the hardware inside a simulator. From the description in the first part of the course, you build things from the gate level using an HDL, working up to designing and building a CPU+RAM, programmable using "Hack" machine language, and an assembler so that you aren't stuck writing opcodes directly.

Part 2 starts from that assembly and goes into developing a higher-level object-oriented language called "Jack", then a compiler and operating system.