You can't install the updates "on" a usb drive, but you can use an external drive to give you more temporary working space:
2017 10 22 HOW TO UPGRADE TO THE LATEST WINDOWS 10 FEATURE UPDATE ON A DRIVE WITH LIMITED SPACE
https://answers.microsoft.com/en-us/windows/for...
This article explains how to tell Windows Install/Update to use an external HD for temporary storage.