After a year or so the wife becomes pregnant and 9 month later gives birth to a baby. Naturally the parents are not yet eligible for citizenship because they haven't been here the required five years in order for citizenship. I don't see any reason that the baby should be denied American citizenship at birth when after all the parents immigrated legally.
Another thing I thought of is : When illegals come here and give birth to their brood they should be treated the same way as Consulate personnel from foreign countries are. If their children are born here in the states, they are citizen from the country the parents are from
If born outside the U.S. it's no, if born in the U.S. yes.
This Supreme Court case covers it.
"TUAN ANH NGUYEN V. INS (99-2071) 533 U.S. 53 (2001)"