Cannabis Growers Bet on AI Data Centers as Prices Collapse — and Hit a Wall

From Cannabis Cultivation to AI Data Centers: A Rescue Plan Meets Resistance

Across the United States, cannabis growers are grappling with a steep decline in wholesale prices. In Michigan, Michael Ward's Harbor Farmz facility opened in 2020 when a kilogram of marijuana sold for around US$5,500. Today, that same kilogram fetches about US$700. A new 24% state wholesale tax has compounded the pressure, with Ward estimating that taxes now consume roughly 75% of his revenue. His annual sales have fallen from US$6.5 million to a projected US$3 million this year.

Faced with these economics, Ward cut his cultivation licenses from three to one and reduced production from 7,500 plants to about 2,000. He began looking for a buyer in a sector attracting massive investment: artificial intelligence. His 3,052-square-metre industrial facility has 1.5 megawatts of electrical capacity, expandable to 2.5 MW within a year and potentially 15 MW long-term. It also has fibre optic connectivity and a modern HVAC system — features that data center developers value.

Ward partnered with data center consultants Phil DeVries and Eric Mack to develop a conversion plan. They estimated the project could generate US$1 million in annual taxes for Kalamazoo and Michigan, compared with the US$60,000 Harbor Farmz currently pays. In April, local authorities approved the necessary zoning change. But after Ward publicly announced the data center plan in June, residents organised a boycott and protest. In August, after a five-hour council meeting, the city approved a moratorium banning new data center construction until August 2027, effectively halting the project despite its zoning approval.

Ward withdrew the property from sale in September, saying he felt trapped. Similar stories are emerging elsewhere. In Las Vegas, cannabis company Jade is marketing its former grow facility to data center buyers. In New York, Weed Inc. saw its plan for a data center on a former golf course stalled by a one-year state moratorium. Meanwhile, a former Aurora Cannabis facility in Saskatchewan — 12,000 square metres with 7 MW of power — has attracted a data center operator's offer. The trend is real, but so are the obstacles.

Why the Cannabis-to-Data-Center Conversion Is Harder Than It Looks

The Economics Driving Cannabis Operators to Data Centers

The collapse in cannabis wholesale prices from US$5,500 to US$700 per kilogram has turned many cultivation facilities into loss-making assets. For operators like Harbor Farmz, the choice is stark: sell at a fraction of invested capital to another cannabis company, or attempt a conversion that could recover the full US$20 million investment. The math is compelling on paper. A data center buyer could pay enough to cover sunk costs, while the operator exits a business where taxes absorb 75% of revenue.

Why Most Conversions Will Fail

Despite the enthusiasm, the gap between cannabis grow houses and data centers is wide. A typical cannabis facility spans about 1,850 square metres, while a data center needs around 9,300 square metres. Power requirements are also vastly different: Harbor Farmz has 1.5 MW, while the Oracle-OpenAI facility being built 170 kilometres away in Michigan will have 1.5 gigawatts — roughly 1,000 times more. Daniel Tropp of AEBOV, a cannabis-focused real estate firm, noted that while interest is high, actual deals are rare. "I think it's an illusion," he said, pointing out that no New Jersey negotiations have closed.

The Niche for Smaller Inference Data Centers

Jeffrey Moerdler, a lawyer at Haynes Boone, sees a growing market for smaller data centers of 10–50 MW, particularly for inference tasks — running AI models rather than training them. These regional facilities are easier to site and market. Moerdler noted that many cryptocurrency mining operations are already converting to mid-sized data centers, a path that could suit former cannabis grow sites with adequate power. The Aurora facility in Saskatchewan, with 7 MW and 10 Gbps fibre, fits this profile and has already received an offer.

Community Backlash and Regulatory Risk

The Kalamazoo moratorium highlights a critical risk: local opposition can override zoning approvals. Residents raised concerns about noise, electricity rate increases, grid strain and water scarcity. Similar moratoriums in New York state have stalled Weed Inc.'s plan. For data center developers, community engagement is becoming as important as technical feasibility. For cannabis operators, the window to convert may be narrowing as more localities impose restrictions.

What This Means for the Data Center Industry

The trend reflects a broader scramble for any industrial property with power and fibre. As large sites are snapped up by hyperscalers, smaller developers are turning to unconventional candidates. However, the cannabis sector's distressed assets may only suit a subset of projects. The Saskatchewan facility shows that scale, power and connectivity can attract serious interest. But for every success, many more will remain stranded — too small, too underpowered, or too politically toxic for conversion.

What This Means for Cannabis Operators, Data Center Developers and Local Governments

The most important insight: the cannabis-to-data-center conversion is a narrow opportunity, not a sector-wide solution. Only facilities with at least 5–10 MW of expandable power, fibre connectivity and sufficient land will attract credible buyers.

For Cannabis Operators

• Verify your actual available power capacity with your utility before marketing the property — capacity can be reassigned if unused, as Ryan Misaresh warned.
• Assess whether your site meets the minimum scale for a small inference data center (10–50 MW potential, at least 9,300 sq m or adjacent land for expansion).
• Engage local government and community early; the Kalamazoo moratorium shows that zoning approval alone is not enough.

For Data Center Developers

• Consider former cannabis facilities in the 10–50 MW range as part of a diversified site pipeline, but conduct thorough due diligence on power availability and community sentiment.
• Prioritise locations without active moratoriums or pending restrictions; New York's one-year ban and Kalamazoo's until August 2027 are immediate red flags.
• Factor in water usage and noise mitigation early to avoid the backlash seen in Michigan.

For Local Governments

• Data center proposals can generate significant tax revenue — Harbor Farmz projected US$1 million annually versus US$60,000 from cannabis — but require clear guidelines on power, water and noise to balance benefits and community concerns.
• Consider targeted incentives for smaller inference facilities that have less environmental impact than hyperscale campuses.

Metrics to Watch

• Michigan's wholesale cannabis tax revenue and any legislative changes to the 24% rate.
• Kalamazoo's moratorium expiry in August 2027 and whether it is extended or lifted.
• Power capacity allocations by utilities in cannabis-heavy regions like Michigan and Nevada.
• Announced conversions of crypto mining sites to inference data centers, as a leading indicator for cannabis facility conversions.