Drain the soaked cashews and add them to a blender with the warm water, nutritional yeast, lemon juice, garlic powder, onion powder, smoked paprika, chili powder, salt, and hot sauce. Blend on high for 1 minute until completely smooth.

Taste and add more salt, lemon, or hot sauce as needed. If too thick, blend in an extra tablespoon of warm water at a time until your desired consistency, about 30 seconds.

Pour into a bowl, top with a sprinkle of smoked paprika or jalapeño slices, and serve right away. For a warm sauce, heat gently in a saucepan over low heat for 2 to 3 minutes, stirring constantly.