MacBook Air unexpectedly reboots to recovery mode overnight

Try running the third party app EtreCheck and post the complete report here so we can examine it for possible clues.

How to use the Add Text Feature When Posting an EtreCheck Report - Apple Community

When are you connecting the power adapter? Before or after putting the laptop to sleep?

Do you have any other external devices or accessories connected to the laptop? If so, disconnect them to see if that makes any difference. Also make sure to connect the power adapter directly to the laptop.

Does this issue occur if you leave the laptop running on just the battery? For testing purposes, I would suggest charging the battery to 100% before leaving it unplugged overnight,.

Try running the Apple Diagnostics to see if any hardware issues are detected. When running macOS Tahoe on an Apple Silicon Mac, the Apple Diagnostics have changed so you will want to select the MRI test (first one on the list). FYI, a passing diagnostic result is meaningless here.

PeterDunsfoldHelp wrote:

Thanks for getting back to me. You must forgive my terminology but what I see is the wallpaper screen with just my name and request to input my password. No task bar or any widgets.

Does this answer your question?

Yes, that answers my question. 

Your description is clear, and you don't need to apologise for the terminology.

What you're seeing sounds like the Mac is restarting overnight, rather than simply waking from sleep. 

The screen with your name and a password field, but no menu bar or widgets, is consistent with the macOS login screen. 

It doesn't, by itself, establish that the Mac has entered Recovery Mode.

The key question is why the Mac is restarting when you leave it plugged into its charger overnight, but it behaves normally during the day.

I'd suggest starting with one simple check: when you next enter your password in the morning, does the Mac display a message saying that it restarted because of a problem, or does it go straight to your usual desktop and reopen your apps?

That distinction will help narrow down the cause without changing any settings unnecessarily.

On second thought and based upon the actually wording in the posting above 

An unexpected overnight restart that leaves your MacBook Air asking for your Mac password before opening apps is not normal startup behaviour.

The first step is to determine whether your Mac is entering macOS Recovery or simply restarting and asking you to unlock the disk.

If the screen says your Mac encountered an issue while starting, see Apple’s startup troubleshooting guide.

What exactly appears on the screen when you open your Mac in the morning?

Does it ask you to unlock the disk, display a macOS Recovery window with options such as Disk Utility, or show a message that your Mac encountered an issue?

This will help identify the appropriate next step without making unnecessary changes to macOS.

Since your MacBook Air stays plugged into its charger overnight and this does not  happen during the day, I’would first like to establish what happens overnight.

When you open your Mac in the morning, do you see the usual login screen or a screen labelled Recovery Assistant? 

After entering your password, do your previously open apps reopen automatically? 

Do you see any message saying your Mac restarted because of a problem? Has this happened since a recent macOS update?

These details will help narrow down the cause. 

If your Mac is restarting unexpectedly, Apple’s guidance on unexpected restarts may be helpful.

Look for the System Settings icon in the dock or in your applications folder. Open that and look in the left column for lock screen. Open that and look for the line stating requiring password. after screen saver begins or turned off. Set that to never. See my screen shot below.

Rebooting I can sometimes fix an issue but in your case it may not. Also when rebooting if you get the message that asks if you want to open apps that presently are being used (or similar statement) decline that choice

Go to system settings, lock screen and set "require password after screen saver" to never. This should fix the issue.