So, this is the result from the end of the first step. We then begin the cycle of denaturing, extension and annealing.
When denatured, they separate. For convenience, I have reorganized the strands. I have also added the primers to the right end for brevity.
Here is how things will look when extended. I have added a number to each of the strands for clarity in the next step. Look at strands 5 and 7. This is exactly the secuence that we are interested in. When annealed, at the end of the second step, we will have one double stranded DNA fragment of interest, just like that!
This is the beauty of the whole process. But wait until the next step.