Michael Tsai found that on modern Apple Silicon Sequoia installs, you can no longer install Sonoma on an external drive.
On Apple Silicon, you could never directly download and install previous major macOS versions, however, you could download previous install apps and use those to create a bootable installer (thumb drive or external SSD) and then boot from that (provided the Mac itself was not newer than that version of macOS) to install an earlier major version to an external drive attached to that Mac (as long as you weren’t connected to the DFU port — remember when Macs used to be simple? 
).
Anyway, as of a recent minor update to Sequoia, that functionality is now broken and you can no longer install anything but Sequoia on external drives attached to Sequoia Macs. Howard Oakley has confirmed this.
https://mjtsai.com/blog/2025/03/25/error-702-installing-macos-on-an-external-drive/