Struggling Cannabis Farms Pivot To Hosting AI Data Centers As Weed Revenue Slides

Cannabis Cultivators Eye Data Center Conversions

Struggling cannabis farmers are considering selling their cultivation facilities or converting them into “mini data center nodes” as the industry faces increased competition, costs, and taxes amid reduced demand. According to Arizona Public Media, cannabis sales peaked in 2024 and oversupply has driven prices down.

Moe Asnani, the former owner of two Tucson D2 Dispensaries, told the public broadcaster that a lot of people are getting out of the cultivation business. “For some reason, there’s a lot more cannabis grown in Arizona than Arizonans use,” Asnani said.

He said these facilities can potentially be repurposed as mini data center nodes. “The whole idea is if you create these smaller nodes where people control their own data, where they’re not at the mercy of other people’s updates and things like that that’s kind of where the idea came in, because I believe in decentralization,” Asnani told the public broadcaster.

Cannabis farming is both power- and water-intensive, which means many facilities already have infrastructure that AI data centers need. Forbes examined a 32,850-square-foot cannabis facility in Kalamazoo, Michigan, that is currently wired for 1.5 megawatts.

That Michigan facility can be expanded to 2.5 megawatts in under a year and 15 megawatts in the long term. It is also provisioned for fiber internet and equipped with a state-of-the-art HVAC system for climate control.

Adaptive reuse gains political support

The concept is dubbed “adaptive reuse.” Tucson City Council member Paul Cunningham said it is a more palatable alternative to massive, purpose-built sites sitting on the outskirts of town.

“Data centers are dirty words, and everybody knows that. And no one wants to build a brand-new data center anywhere,” Cunningham said. “But if we have buildings that were using that amount of water and that amount of energy already in their previous function and [it] can be done without being invasive, I’m OK with exploring that option.”

Even OpenAI and Anthropic are interested in smaller sites as massive hyperscale projects face community opposition. Growing opposition toward large new projects could make former cannabis farms suitable alternatives for operators who need compute online quickly.

Conversion challenges remain

Converting a grow site is not a guaranteed payoff for cash-strapped growers looking to unload unprofitable properties. Niki Krear, vice president of acquisitions of real estate investment trust New Lake Capital Partners, told MJBizDaily that operators look for a sweet spot between connectivity, costs, and regulation.

“It’s a combination of finding affordable power, dense fiber networks, and favorable tax policies,” Krear told MJBizDaily. Many cultivation facilities already have higher-than-average power capacity for lighting and climate control, but data centers often demand twice to thrice more, with upgrades possibly taking up to five years.

Operators seeking smaller sites may also face NIMBY fights from neighbors, along with zoning restrictions, moratoriums, and regulatory hurdles. The lack of economies of scale could end up costing operators more.

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