How did the creation of physical matter take place:[1]
The creation of physical matter did not take place through a chain descent of level to level, known as Ila Vealul, and is not possible to take place through it even if the spiritual lifeforce goes through millions of contractions. Rather, all physical creations come from G-d Himself from the level of Ayin and not through Seder Hishtalshlus, as it is not possible for physical creation to ever derive from the spiritual, and rather it must come from the level of Ayin. Physical creation, including even the level of intellect and wisdom, cannot derive from the speech of G-d, as the creator is the opposite of the creations. Furthermore, even the level of wisdom, Chochmah of Atzilus, was created from Ayin and cannot be created in a way of Hishtalshlus Ilah Vealul. The entire concept of Hishtalshlus Ilah Vealul which is mentioned in Sefarim, is not regarding the creations which are created from the creator but rather regarding the soul and spirit of creations, such as the animal soul which comes from the face of the ox on the chariot. However, actual physical matter, as well as the creation of actual spirituality, comes from actual nothingness, Yeish Meayin Mamash!
[1] Likkutei Torah p. 46b