Nginx proxy using domain as part of url path

I'd like to proxy foo.domain.com to the internal server http://localhost:8080/foo, the subdomain part is dynamic so bar.domain.com is also proxy to http://localhost:8080/bar.

I try this code up and running with redirect.

server {
    listen 80;
    server_name ~^(?<subdomain>.+)\.domain\.com$;
    return 301 http://localhost:8080/$subdomain$request_uri;
}

However, I can't really find the solution using a proxy. I tried this but return 502.

server {
    listen 80;
    server_name ~^(?<subdomain>.+)\.domain\.com$;
    
    location / {
        proxy_pass http://localhost:8080/$subdomain;
        # proxy_pass http://localhost:8080/$subdomain$request_uri; # this also not working
    }
}

Any help is really appreciated.