Preheat the oven to 350 degrees F (175 degrees C). Lightly spray a 2-quart baking dish with cooking spray.
Heat a large skillet over medium-high heat. Cook and stir sausage and onion in the hot skillet until sausage is browned and crumbly, 5 to 7 minutes. Drain and cool.
Meanwhile, whisk milk, eggs, onion powder, salt, garlic powder, and pepper together in a bowl.
Spread sausage mixture over the bottom of the prepared baking dish. Pour egg mixture over the top. Layer with 1/2 of the Cheddar cheese and all of the potato nuggets. Cover with aluminum foil.
Bake in the preheated oven for 40 minutes. Remove foil and sprinkle with the remaining cheese. Bake until melted, about 20 minutes more. Remove from the oven and let stand for 5 minutes before serving.