The former forward is wary that the defeat to Bayern Munich could have an adverse effect against Tottenham this weekend.
The Gunners were beaten 5-1 by Bundesliga champions Bayern Munich on Wednesday evening, with the Germans running riot at the Allianz Arena.
It was a poor defensive display from the Gunners, and in complete contrast to the discipline they had shown in the reverse fixture at the Emirates, which they won 2-0.
And Smith says the result in Germany shows that Arsene Wenger has failed to address the dips in quality which continue to hinder his cause from time to time.
“I was expecting it to be difficult, but not that difficult,” he told talkSPORT.
“They made it that way themselves the way they set up, the way they defended. I was hoping that with all the great performances that they would be able to iron out those horrific defensive displays. Arsene Wenger has got to find the answer, he is responsible.”
The former forward is now worried that the heavy defeat to Bayern in midweek could have an adverse effect on the Gunners in the Premier League.
They are currently joint-top of the table alongside Manchester City, with only goal difference separating the two sides, and have been in fine form, posting a series of impressive wins in recent weeks.
This weekend sees them taking on Tottenham Hotspur in the north London derby and Smith says they must bounce back, but acknowledges that Spurs will be optimistic heading into the game - having gone unbeaten in the league since the opening day of the season.
“As we saw last night, Arsenal are still al long way behind the big clubs,” he added.
“It will knock everybody at the club after all the good work they have done over the last few months and they have got to bounce back in the derby. They look a proper team Spurs now so they will go to the Emirates pretty optimistic.”