Place bacon in a large skillet and cook over medium-high heat, turning occasionally, until evenly browned, about 10 minutes. Drain bacon slices on paper towels; crumble into small pieces.
Preheat oven to 350 degrees F (175 degrees C). Grease a 9x13-inch casserole dish.
Layer potatoes in the prepared casserole dish.
Melt butter in a saucepan over medium heat. Add jalapeno peppers, onion, and garlic; cook and stir until slightly softened, about 5 minutes. Stir in flour until smooth. Season with salt, cumin, chili powder, and pepper; cook until fragrant, about 1 minute. Pour in milk, stirring until sauce thickens, about 5 minutes.
Remove sauce from heat. Add Colby-Monterey Jack cheese gradually, making figure 8 motions with a spoon until cheese is melted. Pour sauce over potatoes.
Bake in the preheated oven, uncovered, until potatoes are tender, 1 to 1 1/2 hours. Top with bacon.