Spain had a history of being an empirical powerhouse, yet they couldn't take over a country half their size? Did they simply not care or was there something stopping them?
empirical powerhouse
Did you mean imperial? Because something is empirical if it's based on verifiable information, I doubt that's what you meant.
Anyway, your question has been answered before, have a look at these threads:
To what extent is Portugal just another one of the Spanish kingdoms?
Portugal was a province in the Kingdom of Galicia, ruled by the King of León.
León itself was the upper quarter of what we would recognize as Portugal and Spain today.
There were many, many rivalries and claims to power in what is now known as Portugal and Spain, with sometimes upwards of seven distinct territories with their own ruling factions.
Portugal was secured as an independent nation when Afonso I declared himself king after his victory over the Moorish (Islamic) occupiers at the battle of Ourique. King Alfonso VII of León and Castile recognized his claim (Effectively surrendering his claims to the area as he was the then current ruler), as did Pope Alexander III in 1179.
The battle of Ourique was a huge defeat for the Moors, and reputedly involved the defeat of five Moorish Kings and started the final part of the Reconquista ending nearly 700 years of Islamic rule of what we now call Portugal and Spain. The Moors were pushed south back to africa into what is now called Algeria.
The period of time from 700-1500 is overflowing with events of immense historical significance and my grossly simplified version is basically a TLDR version of a very complex period of time in that area of the world.
Portugal was also an imperial powerhouse and had a strong ally, England. Spain and Portugal had numerous treaties establishing their border and peace treaties every so often. A full on conquest wouldn't be the smartest thing to do when Spain had other things to worry about (first the Moors in the South, then their territories in Europe and beyond). In 1580-1640, Spain did manage to rule Portugal (Iberian Union) due to the battle of Alcácer Quibir where the Portuguese King at the time, D. Sebastião died. Due to past marriages between Portugal and Spain, D. Felipe II of Spain (I in Portugal) became the successor of the Portuguese crown after beating the weak D. António of Portugal (most Portuguese nobility supported D. Felipe II). The Portuguese revolted against the Spaniards in 1640 due to Portugal's diminishing status in the Union and the lack of interest in Portugal and its empire from Spain (D. Felipe II did a pretty good job, III & IV not so much). At the time Catalonia was also revolting and Spain chose to concentrate their efforts on them instead of Portugal.