In a medium saucepan, bring the 2 cups of water and 2 cups of milk to a simmer over medium-high heat.

Slowly whisk in the grits until fully combined. Reduce the heat to low, cover, and cook for 20-25 minutes, stirring occasionally, until the grits are thick and tender.

Remove from heat and stir in the butter and shredded cheddar cheese until melted and smooth. Season with salt and pepper. Cover to keep warm.

While the grits cook, place a large skillet over medium heat. Add the chopped bacon and cook until brown and crispy, about 5-7 minutes. Use a slotted spoon to transfer the bacon to a paper towel-lined plate, leaving the bacon fat in the skillet.

Add the shrimp to the skillet in a single layer. Cook for 1-2 minutes per side until pink and just opaque. Remove from the skillet and set aside.

Add the chopped onion and bell pepper to the skillet. Sauté for 4-5 minutes until softened. Add the minced garlic and cook for 1 minute more until fragrant.

Pour in the chicken broth, scraping the bottom of the pan to release any browned bits. Stir in the heavy cream and smoked paprika. Bring the sauce to a simmer and cook for 2-3 minutes until it thickens slightly.

Return the cooked shrimp and crispy bacon to the skillet. Stir to combine and heat through.

Spoon a generous serving of cheesy grits into each bowl. Top with the shrimp and sauce mixture. Garnish with fresh parsley and serve immediately.