Preheat the air fryer to 400°F (200°C) for 5 minutes.
In a medium bowl, whisk together the egg and water until well combined.
In a separate large bowl, combine cornstarch, garlic powder, onion powder, smoked paprika, salt, and black pepper.
Dip each shrimp into the egg mixture, then dredge it in the cornstarch mixture, ensuring an even coating. Place coated shrimp on a plate.
Lightly spray the air fryer basket with olive oil spray to prevent sticking.
Arrange the coated shrimp in a single layer in the air fryer basket, making sure they do not overlap. You may need to cook in batches depending on your air fryer size.
Spray the tops of the shrimp lightly with olive oil spray to help crisp the coating.
Cook the shrimp in the air fryer at 400°F (200°C) for 7-8 minutes, flipping halfway through, until the shrimp are pink, opaque, and the coating is crispy.
Remove the shrimp from the air fryer and serve immediately with your favorite dipping sauce.