Set oven to 300°. Melt butter in a rondeau over medium heat. Add onion and sauté until translucent. Add garlic and cook until fragrant. Add milk and water and bring to a boil.
Once boiling, slowly whisk in grits. Cook, stirring until mixture begins to thicken. Remove from heat, cover, and bake until creamy, roughly 30 minutes.
Remove from oven and whisk in OLD BAY® Hot Sauce until full incorporated. Hold hot for service.