Bring 3 1/2 cups water, 1 cup evaporated milk, macaroni, and 1/2 tsp salt to a simmer in a skillet over high heat. Cook at a vigorous simmer, stirring often, until macaroni is tender and liquid has thickened, 9-12 minutes.

Whisk remaining 1/2 cup evaporated milk, cornstarch, mustard, and hot sauce together in a small bowl, then stir into the skillet. Continue to simmer slightly thickened, about 1 minute.

Turn off heat, stir in Cheddar and Monterey Jack, one handful at a time, adding water if needed to adjust consistency of sauce. Stir in butter and season with salt and pepper to taste. Serve immediately.