Because nipples are formed before the Y chromosome triggers male reproductive organ development. We are all female by default during development, we even have the primitive female reproductive organs (Mullerian duct). Then, the Y chromosome codes for a funny protein called SRY that makes us get rid of the Mullerian duct and get Wolffian ducts instead which give rise to male reproductive organs. Sometimes, the SRY protein doesn't do its job properly and the Mullerian duct remains while Wolffian ducts don't appear. These people are born as female although they have XY chromosomes.
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