Why Struggling Cannabis Growers Are Betting On The AI Data Center Boom

0:28This episode is brought to you by Google Chrome. stopped being safe. SimpliSafe keeps danger away from your family with three layers of protection. One, smart AI cameras and live U.S.-based agents help stop intruders before they break in. Two, we sound the alarm at points of entry. Three, our agents request emergency response. Plan starting around a dollar a day. Right now, get 70 % off your new system with professional monitoring at simplisafe.com slash Spotify. Outdoor deterrence plans start at$49.99 a month. Visit simplisafe.com slash licenses for alarm license information. Today on Forbes, why struggling cannabis growers are betting on the AI data center boom.

1:05Michael Ward and his investors spent$20 million to build a 32 ,850-square-foot cannabis facility called Harbor Farms in Kalamazoo, Michigan, in 2020. This was back when a pound of marijuana went for roughly$2 ,500. Ward knew the price would drop as the market expanded and matured, but he never thought it would plunge to where it is today, a paltry$700. Then, this year, Michigan added a 24 % wholesale tax on top of everything else. Ward says, quote, Let's put it this way, breaking even is the new succeeding. By his estimate, taxes eat about 75 % of his company's revenue, leaving him just barely in the black most months.

1:56Revenue has fallen from$6.5 million to a projected$3 million this year, and he has since surrendered two of his three cultivation licenses, taking the operation from a peak of 7 ,500 plants to roughly 2 ,000. He says, quote, quote, we're better off than most. That's kind of the joke in the industry. So Ward went looking for a buyer in the one industry with more money than it can spend, AI. His weed facility has many of the things on a small AI data center developer's shopping list. The 32 ,850 square foot industrial complex is wired for 1.5 megawatts now, with capacity to get up to 2.5 megawatts under 12 months and 15 in the long term.

2:45And it's threaded with fiber. Temperature is regulated by a state-of-the-art HVAC system. His four-acre parcel sits next to another three acres of brownfield that is also up for sale. Last spring, Ward partnered with AI data center consultants Phil DeVries and Eric Mack to scratch out a plan. They gathered stats about how the redevelopment of his property to a data center would increase taxes collected for Kalamazoo and the state. In their presentation to the city council, Ward claims a data center would generate$1 million in annual tax revenue, up from his current annual tax bill for the cultivation facility of$60 ,000.

3:28He figured if he managed to sell it, he'd be made whole on the$20 million investment and still stay in business by buying weed on the wholesale market for less than it costs to grow. Ward is hardly the only grower to make that calculus. Weed prices are collapsing across the country. There are high taxes. The rescheduling ruling has been delayed. Grow operators from across North America see in the AI data center boom a golden ticket out of a grueling economic reality for an agricultural product declining in value. But AI money is proving far easier to envy than collect. For a while, Ward's plan looked like it might work.

4:11In April, Kalamazoo granted zoning clearance to allow for Harbor Farms' building to become a data center. But then in June, Ward listed the property as a potential data center and all hell broke loose. Community members took to Facebook and Reddit, imploring people to boycott Harbor Farms and speak up against data centers at the next city council meeting. Someone online even asked if anyone had Ward's home address. And then by August, the idea was dead. During a contentious five-hour-long city council meeting, residents vilified the proposal, warning of the potential ills data centers can unleash on a community, noise pollution, higher electricity bills, and grid overload, and water depletion.

4:57Instead of the exemption he'd hoped for, a moratorium was passed blocking any and all data center development in Kalamazoo until August 2027. That includes Harbor Farms, which was already zoned for it. Ward says, quote, We looked at that as an opportunity to possibly pivot, and had no idea that we would be the pariah of such negative sentiment and pitchforking and bonfires. Ward pulled the listing in September. It just wasn't worth it. He still hopes a buyer might find him. But for now, he's stuck. Ward says, quote, they have literally hogtied us to this building and there's no real outlet. They locked us into the biggest bucket of shit and hoped we wouldn't dig our way out.

5:43And we haven't. Harbor Farms was never going to be a hyperscale cash cow. The facility Oracle is building for OpenAI in Saline, Michigan, some 105 miles away, will start at 1.5 gigawatts, or about 1 ,000 times Harbor Farms' current electrical capacity. What Harbor Farms' property could be is an inference data center, a much smaller regional cog in the AI universe. Those are somewhat easier to sell. In fact, Jeffrey Mordler, a lawyer who chairs Haynes-Boons Data Centers and Digital Infrastructure Practice Group, says that he is seeing many more smaller deals now that power and land are in shorter supply.

6:28He says, quote, That's where I see potential for cannabis growth facilities possibly fitting in. For full coverage, check out Will Yakowitz's piece on Forbes.com. This is Kieran Meadows from Forbes. Thanks for tuning in. Thank you.

7:17Straight to my door. Free shipping. Free returns. No subscription required. Get started today at stitchfix.com. That's stitchfix.com.