If I had to choose between my kids getting good grades and working on ambitious projects of their own, I'd pick the projects. And not because I'm an indulgent parent, but because I've been on the other end and I know which has more predictive value. When I was picking startups for Y Combinator, I didn't care about applicants' grades. But if they'd worked on projects of their own, I wanted to hear all about those. Tha…
The reason people aren't as interested in side projects is that most aspects of professional software development are optional in side projects. The vast majority of side projects are done alone, and for a very narrow purpose: write a command line utility to learn Rust, write a web app to work through a design idea for it, write a game for the sake of implementing a pathing algorithm.
As a result, in most cases programmers rightly neglect 95% of the work that it would require to produce a version for public consumption, and on top of that, they don't have to communicate with product, QA, or other developers. Building something that is fit for purpose is usually orders of magnitude easier when the purpose is to learn something, satisfy curiosity, or solve the narrow version of a problem that you are personally facing.
Because of this, interviewers have very low initial assumptions about what it means when you say you did something as a side project, and you'll have to show them.