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Data centers based on Passive Optical Networks (PONs) can offer scalability, low cost and high energy-efficiency. Application in data centers can use Virtual Machines (VMs) to provide efficient utilization of the physical resources. This paper investigates the impact of VM placement on the energyefficiency in a PON-based data center architecture that utilizes cascaded Arrayed Waveguide Grating Routers (AWGRs). In this paper, we develop a Mixed Integer Linear Programming (MILP) optimization model to optimize the VM placement in the proposed PON-based data center architecture. This optimization aims to minimize the power consumption of the networking and computing by placing the VMs and their demands in the optimum number of resources (i.e., servers and networking devices) in the data center. We first minimize the processing power consumption only and then we minimize the processing and networking power consumption. The results show that a reduction in the networking power consumption by up to 75% is achieved when performing joint minimization of processing and networking power consumption compared to considering the minimization of the processing power consumption only.