Dice the potatoes into even half-inch cubes. Rinse them briefly under cold water to remove excess starch, then pat them very dry with a clean kitchen towel or paper towels. Dry potatoes are the secret to getting them crispy in the air fryer.
In a large bowl, toss the dried potato cubes with the olive oil, smoked paprika, garlic powder, onion powder, dried thyme, salt, and black pepper. Make sure every piece is evenly coated.
Preheat the air fryer to 400 degrees F. Spread the seasoned potatoes in a single layer in the basket. Avoid overcrowding so the potatoes crisp up rather than steam.
Air fry the potatoes for 10 minutes, then shake the basket well. Add the diced red bell pepper and yellow onion, toss everything together, and spread the mixture back into an even layer.
Continue air frying for another 8 to 10 minutes, shaking once more halfway through, until the potatoes are golden brown and fork-tender and the peppers and onions are softened with lightly charred edges.
Transfer to a serving dish and sprinkle with fresh chopped parsley. Serve immediately alongside eggs, toast, or your favorite breakfast items.