Prep the Potatoes: Rinse the baby potatoes and cut them into quarters (or halves if very small), keeping the size consistent for even cooking. In a large bowl, toss the potatoes with olive oil, salt, pepper, and smoked paprika if using. Preheat the air fryer to 400°F (200°C) for 3-5 minutes, then air fry the potatoes in a single layer for 12-15 minutes, shaking the basket halfway through. They should be crispy outside and fork-tender inside. Transfer to a bowl and keep warm.
Prep the Steak Bites: Pat the steak cubes dry with paper towels to ensure proper searing. Season generously with salt and pepper, then toss with olive oil in a clean bowl. Air fry at 400°F (200°C) for 7-9 minutes, shaking halfway through. For medium-rare, remove when internal temperature reaches 135°F (57°C). If needed, cook in batches to avoid overcrowding. Allow steak bites to rest for a few minutes.
Make the Garlic Butter: Melt the butter in a small saucepan on the stove or in the microwave. Add minced garlic, Italian seasoning, red pepper flakes, and parsley. Stir well to combine, allowing the garlic to bloom in the hot butter without browning.
Combine and Serve: Combine the steak bites and potatoes in a large bowl. Pour the garlic butter over everything and toss to coat thoroughly. Garnish with extra parsley if desired and serve immediately.